Conard v. Auto-Owners (Mut.) Ins. Co.

• Decision Date: 18 September 1962
• Docket Number: No. 50640,AUTO-OWNERS,50640
• Parties: James CONARD, Appellant, v.(MUTUAL) INSURANCE COMPANY and Louis Forret and Orville A. Reich, a partnership, d/b/a Forret & Reich Agency, Appellees.
• Court: Iowa Supreme Court

Page 53

117 N.W.2d 53

254 Iowa 157

James CONARD, Appellant, v. AUTO-OWNERS (MUTUAL) INSURANCE COMPANY and Louis Forret and Orville A. Reich, a partnership, d/b/a Forret & Reich Agency, Appellees.

No. 50640.

Supreme Court of Iowa.

Sept. 18, 1962.

Gamble, Read, Howland, Gamble & Riepe, by B. A. Webster, Jr., Des Moines, for appellant.

Charles Bookin Ottumwa, for appellee Auto Owners (Mutual) Ins. Co.

Duncan, Jones, Hughes, Riley & Davis, Des Moines, for appellees Louis Forret and Orville A. Reich.

THORNTON, Justice.

Plaintiff, an operator of a trucking line, brings this suit in equity to reform a liability insurance policy as against defendant insurance company, and in the alternative for damages against the defendants, Forret & Reich, the selling insurance agents. Plaintiff bases his case upon a telephone call wherein he inquired of Mr. Reich, one of the partners of the insurance agency, if he was covered in the event a salesman or somebody went out the door and coming up the steps fell down and broke their leg or anybody on the dock got hurt. Plaintiff states Mr. Reich said that his policy did cover it. In fact there was no such coverage. This conversation took place December 2, 1957.

During December, 1957, defendant insurance company, through defendant agents, issued and delivered to plaintiff, three renewal policies effective January 1, 1958, for one year. These policies were identical to the prior ones, one was a fleet or truck liability policy, one cargo liability, and a workmen's compensation policy. Plaintiff canceled the cargo policy and the workmen's compensation policy during the month and placed that coverage in another company through another agent. The fleet or truck liability policy is the one asked to be reformed. The trial court denied plaintiff relief and he appeals.

Plaintiff has operated a truck line since 1947. From 1947 to 1954 plaintiff purchased his insurance from defendant agents in a company other than defendant company. In September, 1954, Mr. Bain, an insurance agent, called on plaintiff. The extent of the conversation at that time is not definite. But it is clear plaintiff was alerted to lower insurance rates. He called on defendants Forret and Reich for the purpose of obtaining less costly rates. As a result, plaintiff's insurance, consisting of three policies, one covering plaintiff's liability on his trucks, called a fleet policy in the record, this policy also covered collision, fire and theft, one covering plaintiff's cargo liability, and the third covered plaintiff's workmen's compensation liability, was placed by defendant agents with defendant insurance company. One of the agents, Mr. Reich, testified that at the same time he discussed with plaintiff a schedule liability policy, this type of policy is also referred to in the record by all parties as a general liability policy and a premises liability policy. But plaintiff did not purchase it because it cost too much. Plaintiff testified he did not recall any such conversation and that he did not know what general liability insurance was until in December, 1957. Defendant agents had no further contact with plaintiff for the purpose of selling him insurance until after the occurrence for which recovery is sought here. They did have numerous telephone calls from him reporting accidents and losses under the policies. In 1955 and 1956 Mr. Bain called on plaintiff shortly before the time for the renewal of the policies. The testimony of the extent of the discussions relating to general liability insurance of Mr. Bain and plaintiff conflicts with Mr. Bain's statement taken before trial and plaintiff's discovery deposition. When Mr. Bain called on plaintiff December 2, 1957, he examined plaintiff's policies and told plaintiff he did not see general liability coverage in the policies. At that time Mr. Bain referred specifically to a salesman or somebody, not an employee, being injured on plaintiff's dock. Plaintiff, in the presence of his bookkeeper, an office girl, and Mr. Bain, called defendant insurance agent Mr. Reich and asked him if he, plaintiff, was covered in the event, 'a salesman or somebody went out the door and coming up the steps fell down and broke their leg or anybody on the dock got hurt they could sue me.' He testified Mr. Reich told him his policy covered a case such as that. Mr. Reich denies this conversation took place. Shortly thereafter, as was the custom, the renewal policies were mailed to plaintiff. The record does not show plaintiff ever actually signed an application. He paid for the truck policy and canceled the others. The others were placed with Mr. Bain's company. The reason, according to plaintiff was price. As to the policy he kept, plaintiff testified:

'They just sent me the policy and the statement for the premium and I paid it. I believed it was exactly like the policy which I have just said Mr. Reich stated would be premises liability. Upon receipt of that policy I did not read it over or examine it.'

In February, 1958, Mr. Wilson, a driver for another trucking firm, was injured on plaintiff's dock. Plaintiff did not report this occurrence to defendant agents. He says he didn't see where he had any liability. He thought workmen's compensation insurance carried by Mr. Wilson's employer would take care of it. In August, 1958, Mr. Wilson sued plaintiff. When the original notice was served on him plaintiff called defendant agents. He was told to hold onto the papers and they would have a man pick them up. Within a few days an adjuster for defendant company contacted plaintiff and then advised him his policy did not cover the Wilson injury. After being so advised plaintiff employed counsel to defend. He called Mr. Bain to obtain general liability insurance. Mr. Bain advised him to place it with the agents carrying his other liability insurance. He then called defendant agents and ordered general liability insurance. Plaintiff did not tell the adjuster he had or thought he had insurance covering his liability for the Wilson injury. He did not complain to defendant agents when he ordered the general liability policy; nor did he tell his attorney on his first visit to him that he was under the impression he had insurance. Plaintiff states he had forgotten the December 2, 1957, conversation with Mr. Reich. He was reminded of it by Mr. Bain in a telephone call a few days after his call to Mr. Bain for insurance. Thereafter, plaintiff through his counsel made a demand on defendant insurance company to defend. This was refused. Judgment ran against plaintiff in the Wilson suit. He seeks to recover the amount of the judgment and the cost of defense.

The trial court held the December 2, 1957, telephone conversation between plaintiff and defendant Mr. Reich did take place. But it also held that there was no reliance on such representation, and that plaintiff knew at all times that he did not have general liability insurance. On this basis reformation was denied because there was no mistake on plaintiff's part and relief against defendant agents was denied because plaintiff did not rely on the agent's statement. We agree with this result.

I. In equity ...