Columbia Mut. Cas. Ins. Co. v. Ingraham

• Decision Date: 05 October 1994
• Docket Number: No. CA,CA
• Citation: 47 Ark.App. 23,883 S.W.2d 868
• Parties: COLUMBIA MUTUAL CASUALTY INSURANCE COMPANY, Appellant, v. Trehlan INGRAHAM, Appellee. 93-893.
• Court: Arkansas Court of Appeals

Page 868

883 S.W.2d 868

47 Ark.App. 23

COLUMBIA MUTUAL CASUALTY INSURANCE COMPANY, Appellant, v.Trehlan INGRAHAM, Appellee.

No. CA 93-893.

Court of Appeals of Arkansas En Banc.

Oct. 5, 1994.

Jerry L. Lovelace, Springdale, for appellant.

John W. May, Fayetteville, appellee.

COOPER, Judge.

The appellee in this insurance contract case filed an action against the appellant insurance company to recover insurance proceeds for the loss of a dwelling by fire.After a jury trial, a judgment in the amount of $42,048.75 was entered for the appellee.From that decision, comes this appeal.

For reversal, the appellant contends that the trial court erred in refusing to direct a verdict in favor of the appellant, in admitting evidence regarding the appellant's processing of insurance applications, and in submitting to the jury the issue of the insurance agent's authority to modify the insurance binder.We affirm.

The record reflects that, on February 20, 1989, the appellee applied to the appellant, through the Rowe Insurance Agency, of Lincoln, Arkansas, for fire insurance covering a house near Springdale.Elizabeth Spears, an employee of the Rowe agency, filled out the application from information given to her by the appellee.The appellant gave the appellee a binder on the property, which stated:

The Company binds insurance as above applied for in accordance with all the terms and conditions of the policy regularly issued by the Company in the state in which the property is located.It is a condition of this binder that it shall be void if a policy of the Company is issued or coverage shall cease if it is otherwise terminated.In no event shall this binder continue in force beyond 30 days from its inception date.This binder shall not be valid unless signed by the duly authorized agent of the Company.

On the back of the application, Ms. Spears wrote the word "no" in response to questions asking if any member of the appellee's household had ever been convicted of a crime and the number of fire losses the appellee had had.In fact, however, the appellee had previously been convicted of a number of felonies, including arson.The appellee signed this portion of the application.

On March 6, 1989, the appellant assertedly sent a notice of rejection of the appellee's application to the Rowe agency providing that it would provide no coverage on the property after 12:01 a.m., March 22, 1989.The reason for this rejection was stated as follows: "Due to the acreage and usage of it, this dwelling should be submitted on a Farm Fire Application."Later, the Rowe agency denied ever having received this notice of rejection, and its message was not communicated to the appellee.

The appellee's house was destroyed by fire on April 16, 1989.After the appellant denied coverage for the loss, the appellee brought this action against the appellant.

At trial, the appellee testified that he went with his friend James Rhine to the Rowe agency.He stated that Ms. Spears filled out the application based upon his answers and that, when asked about his criminal record by Ms. Spears, he told her that he had been convicted of two felonies, including arson.He stated that, when he left the agency, he believed that he had insurance coverage because he asked Ms. Spears how long it took for the insurance to go into effect:

Q What did she tell you?

A She said, "The minute you step out the door it's in effect.She said, "If your house burns down or blows away, or anything happens to it, you're covered."

Q Well, did she say anything to you about how long the coverage would last?

A It was supposed to last for a year.

Q Had you paid her a premium for a year?

A Yes, sir.

Q Did Elizabeth Spears ever mention the word "binder" to you?

A No, sir.

The appellee further stated that he subsequently called to check on the policy and someone at the agency informed him that he would have it any day.James Rhine testified that he was present when Ms. Spears asked the appellee if he had had any felony charges and that the appellee had informed her that he did.

At the conclusion of the appellee's case, the appellant moved for directed verdict on the ground that the language of the binder, quoted above, clearly demonstrated that there was no coverage for the fire loss.The appellant also argued that there was no allegation that the appellant had done anything that would lead the appellee to believe the binder had been extended beyond thirty days and that the Rowe agency, as a soliciting agent, could not extend coverage or waive any of the policy requirements.The trial judge denied the motion, noting that the appellee had testified that Ms. Spears had told him that the insurance was to last a year; that such a contract can be orally modified by the parties; and that, under certain circumstances, even a soliciting agent can bind the company.

Elizabeth Spears testified that she did not specifically remember talking to the appellee but assumed that she did not tell him that the binder was extended beyond thirty days.She stated that, ordinarily, she does not tell people that the binder with Columbia is limited to thirty days and that, if people ask, she tells them how long their coverage is to last.She stated that the appellee had told her he had never been convicted of a crime and, if he had told her that he had been convicted of arson, she would have stopped filling out the application.She added that she might have submitted it to the appellant as non-bound.

Over the appellant's objection on the ground of relevance, Ms. Spears testified that, ordinarily, the agency did not receive a policy back from the appellant within the thirty-day time frame, and that it was her opinion that a binder was good beyond thirty days if the agency did not receive notice of rejection or acceptance.She stated that she may have told Mr. Ingraham that.She further testified that she never notified the appellee that his application had been rejected because she did not receive a rejection notice from the appellant.She stated that it was common practice upon receipt of a rejection to resubmit the application to some other carrier after first contacting the applicant.She also stated that she held herself out as having authority to sell insurance coverage from the date of application until it was either accepted or rejected, and that it would sometimes take longer than thirty days to hear from the appellant about its decision on an application.She also stated that it would not surprise her if the appellee had thought that, when he left the office, he had coverage for a period of one year.

Penny Moore, an underwriter for the appellant, testified that the appellant will not issue a policy to someone convicted of arson, and that its independent agents are not allowed to bind coverage for someone convicted of arson.She stated that the appellant never issued a policy to the appellee and that it was not the appellant's policy to extend its binders beyond thirty days.She testified that the application was received in her office February 27, 1989, and that the rejection went out on March 6, 1989.She stated that it is the company's policy of sending out such rejections within thirty days and that applications are a priority.She further stated that a normal turn-around time is approximately two weeks, but that this application was processed within nine days.

At the conclusion of the evidence, the appellant renewed its motion for directed verdict and objected to several jury instructions regarding oral modification of contracts; the principles of agency, real or apparent; and soliciting or general agents.The jury returned a verdict for the appellee, and a judgment on this verdict was entered on March 25, 1993, in the amount of $42,048.75.

The appellant first contends that the circuit court erred in failing to direct a verdict in its favor because the appellee presented no evidence that coverage was extended beyond the thirty-day binder as stated in the application.The appellant bases this argument on its assertion that the appellee presented no evidence of any oral modification and admitted that he was never specifically told that the binder would be extended beyond thirty days.The appellant also argues that, because no communication occurred between the appellee and Ms. Spears regarding the extension of the thirty-day binder, it was impossible for there to have been an oral modification of the insurance binder.We do not agree.

In reviewing the denial of a motion for a directed verdict, we give the proof its strongest probative force.Larzelere v. Reed, 35 Ark.App. 174, 180, 816 S.W.2d 614(1991).Such proof, with all reasonable inferences, is examined in the light most favorable to the party against whom the motion is sought; if there is any substantial evidence to support the verdict, we will affirm the trial court.Id.;Washington County Farmers Mut. Fire Ins. Co. v. Phillips, 34 Ark.App. 198, 201, 807 S.W.2d 940(1991).Substantial evidence is that evidence which is of sufficient force and character that it will, with reasonable certainty and precision, compel a conclusion one way or another; it must force or induce the mind to pass beyond a suspicion or conjecture.Bank of Malvern v. Dunklin, 307 Ark. 127, 129, 817 S.W.2d 873(1991);Newberry v. Johnson, 294 Ark. 455, 458, 743 S.W.2d 811(1988).Consequently, a motion for directed verdict should be granted only if the evidence so viewed would be so insubstantial as to require a jury verdict for the party to be set aside.Bice v. Hartford Accident & Indem. Co., 300 Ark. 122, 124, 777 S.W.2d 213(1989).A directed verdict should not be granted where the evidence is such that fair-minded persons might reach different conclusions.Mankey v. Wal-Mart Stores, Inc., 314 Ark. 14, 16, 858 S.W.2d 85(1993).

It is well settled that a written contract may be modified by a later oral agreement.O'Bier v. Safe-Buy Real Estate...