Curran Hydraulic Corp. v. National-Ben Franklin Ins. Co. of Illinois

• Decision Date: 18 January 1978
• Docket Number: NATIONAL-BEN,No. 59190,59190
• Citation: 261 N.W.2d 822
• Parties: CURRAN HYDRAULIC CORPORATION, Appellee, v.FRANKLIN INSURANCE COMPANY OF ILLINOIS, Appellant.
• Court: Iowa Supreme Court

Page 822

261 N.W.2d 822

CURRAN HYDRAULIC CORPORATION, Appellee, v. NATIONAL-BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS, Appellant.

No. 59190.

Supreme Court of Iowa.

Jan. 18, 1978.

Fuerste, Carew, Coyle, Juergens & Sudmeier, Dubuque, for appellant.

Reynolds, Kenline, Breitbach, McCarthy, Clemens & McKay, Dubuque, for appellee.

Heard by MOORE, C. J., and LeGRAND, REES, UHLENHOPP and McCORMICK, JJ.

McCORMICK, Justice.

This appeal arises from an insurance coverage dispute. The litigated question is whether property of plaintiff Curran Hydraulic Corporation was insured by defendant National-Ben Franklin Insurance Company of Illinois on April 16, 1974, when it was destroyed by fire. The controversy was tried to a jury which found for plaintiff and fixed its recovery at $350,000. Defendant contends that it was entitled to a directed verdict and that the trial court erred in an instruction. We find there was sufficient evidence to submit the case to the jury and the giving of the challenged instruction was not reversible error. We affirm.

In considering a motion for directed verdict the court views the evidence in the light most favorable to the party against whom the motion was made. Osterfoss v. Illinois Central Railroad, 215 N.W.2d 233, 238 (Iowa 1974). And in determining, as we must here, whether the evidence supports giving an instruction on a particular issue, the evidence is given the most favorable construction it will reasonably bear in favor of the party urging submission. Miller v. International Harvester Co., 246 N.W.2d 298, 301 (Iowa 1976). Therefore, resolution of both issues in this case requires examination of the evidence in its light most favorable to plaintiff. It will be summarized in that light here.

Plaintiff is an Illinois corporation engaged in the manufacture, assembly and sale of hydraulic fittings and systems. From its inception in 1970 until October 1973, the business was located in McHenry, Illinois. It began moving to Dyersville, Iowa, in October 1973, and by March 1974 its assembly and sales operations were in Iowa and only the manufacturing operation remained in Illinois. The business was housed in Dyersville in a portion of a building known as the Coyle Wall building rented on a month to month basis from its owner Joe Ertl. The building had a local address of 301 Fifth Street N.W., although the address was not displayed on the structure, nor were street addresses shown on other business buildings in Dyersville, a community of approximately 4,000 people. A new steel building for the business was under construction. It was being built by the Peridot Corporation, of which William Curran, president of plaintiff, and his secretary were the stockholders. The plan was for plaintiff to lease the building and move the entire business into it when it was completed. Curran obtained the address 528 Fifth Street N.W. for the new building from the city and used it on plaintiff's stationery from the time of the initial move to Dyersville. Business mail in Dyersville was not locally delivered.

Roger Duba was a financial consultant who had helped plaintiff obtain bank financing. In monitoring a bank loan Duba became concerned about whether plaintiff was meeting its obligation to keep its equipment and inventory in Iowa insured at fair market value. He and Curran soon realized the property in Iowa was under-insured, although it had been adequately insured in Illinois with American States Insurance Company. Duba arranged to accompany O. J. Wheeler, an independent agent in Illinois, to a meeting with Curran in Iowa on March 2, 1974.

Wheeler desired plaintiff's business and held himself out at the meeting as capable of providing any necessary insurance services. Duba, Wheeler, Curran, and William Rose, an associate of Curran, attended the March 2 meeting in Curran's office in the Coyle Wall building. Wheeler inspected the equipment and inventory in use there and studied the American States policy which covered plaintiff in Illinois and provided off-premises protection of only $10,000. The American States policy year commenced each April 10. At Curran's request, Wheeler agreed to obtain $50,000 insurance on his equipment in Dyersville, $250,000 on inventory there, and $25,000 monthly business interruption insurance. He also agreed to obtain $60,000 liability coverage to protect plaintiff against any claim by Ertl for loss of the building. Products liability and workers compensation coverage was also discussed.

Curran emphasized to Wheeler that he wanted to obtain insurance on the property and operations in the Coyle Wall building. Although Curran said he wished to move as soon as the new building was complete, he did not estimate for Wheeler when that might be. Without having specifically requested Wheeler to do so, he expected Wheeler to transfer the coverage to the new building when the property and operations were moved there.

While Wheeler was in Dyersville, because Duba wanted to see the new building in connection with financing concerns, the group visited it. Construction was about 60 percent complete at that time.

Even though he was an authorized agent for American States in Illinois, Wheeler learned upon inquiry after his return home that American States would not authorize him to write plaintiff's coverage in Iowa. On March 6, 1974, Wheeler notified plaintiff of that fact and suggested Curran seek insurance locally. Duba asked Wheeler in plaintiff's behalf to keep trying to obtain coverage, and Wheeler agreed to do so.

In late March Wheeler contacted defendant, a subsidiary of the Continental Corporation, for which he was also an Illinois agent. On March 26, 1974, after obtaining certain financial data from Duba, he submitted an application to defendant. He assumed, without checking with Duba or Curran, that plaintiff had already moved into the new building and identified that building on the application as the location of the property to be insured. On about March 28, 1974, he and Duba lunched in Chicago with Thomas R. Thomas, sales superintendent of defendant, discussed plaintiff's business, and successfully convinced Thomas of the desirability of insuring plaintiff.

Wheeler subsequently pressed defendant's underwriters to obtain approval of the application. They testified he told them plaintiff was moving into its new building April 6, 1974, although he denied doing so, insisting he thought plaintiff had moved in March. He cleared proposed coverage amounts with Duba who in turn informed Curran about them. The location of the property to be insured was not discussed and Wheeler did not reveal he had applied for coverage only in the new building. Defendant's underwriting department recognized a Continental subsidiary other than defendant would need to issue the policy because defendant was not authorized to do business in Iowa, but approval of the risk was obtained. Wheeler was authorized to bind the coverage on April 4, effective April 10, 1974.

Wheeler sent plaintiff the following binder letter:

April 4, 1974

Curran Hydraulics, Inc.

528 Fifth Street N.W.

Dyersville, Iowa 52043

Re: Insurance Binder

Gentlemen:

Pending the issuance of policies to be effective at 12:01 a. m. April 10, 1974, this letter is your evidence of insurance coverage in the National-Ben Franklin Insurance Company at limits:

1) $60,000 Fire & Extended Coverage on the Building

2) $250,000 Fire & Extended Coverage on the contends consisting of machinery, stock, furniture, and fixtures

3) $25,000 per month for six months on use & occupancy (Loss of earnings)

4) $2,000 Burglary & Robbery

5) $500,000 Public Liability including Product Liability

6) Workmen's Compensation & Employers Liability

It is a pleasure to be of service in connection with this business and I trust you will be able to use the facilities of this agency still further.

Very truly yours,

O. J. Wheeler

Plaintiff had not moved into the new building and in fact did not move its business there until June 1974. The Coyle Wall building and its contents, including plaintiff's Iowa equipment and inventory, were destroyed by fire in the early morning of April 16, 1974. Duba informed Wheeler of the loss. Wheeler notified Continental which caused it to be investigated. Coverage was later denied on the ground the property and operations in the Coyle Wall building were not insured because the binder covered only plaintiff's property and operations in the new building. This lawsuit resulted.

I. Defendant's motions for directed verdict. In moving for directed verdict at the conclusion of plaintiff's evidence and at the close of all evidence, and in moving for judgment notwithstanding the verdict, defendant asserted the evidence was insufficient for the jury to find that the binder letter created a contract insuring plaintiff in the Coyle Wall building. In addition, defendant attacked the sufficiency of evidence to support a finding that Wheeler had authority to bind defendant to insure plaintiff anywhere but in the new building. The trial court overruled these motions and its rulings are assigned as error.

Defendant admits that the binder letter established a contract to insure and that Wheeler was its agent in making the contract. However, it alleges that the contract insured plaintiff only in the new building and that Wheeler lacked authority to make any other contract.

A. Sufficiency of evidence of the contract. The contention that the binder letter gave coverage only in the new building cannot be based on the language of the binder. It does not describe the location of the property to be insured. Addressing the binder to plaintiff at its new address did not make the new address the location to be insured, particularly since plaintiff used that mailing address even before construction of the new building. Similarly, the reference in the binder to "$60,000 Fire & Extended Coverage on the Building" could be taken by plaintiff to refer to the coverage...