Exum v. Ferguson

• Decision Date: 30 November 1981
• Docket Number: No. 13315,T,RICHTER-ROB,13315
• Parties: Roy EXUM, d/b/a Roy Exum Trucking, Plaintiff-Appellant, and Cross-Appellee, v. Robert E. FERGUSON, d/b/a Bob Ferguson Agency, Defendant-Third-Party Plaintiff-Appellee and Cross-Appellant, v.hird-Party Defendant-Appellee and Cross-Appellee.
• Court: New Mexico Supreme Court

Page 553

637 P.2d 553

97 N.M. 122

Roy EXUM, d/b/a Roy Exum Trucking, Plaintiff-Appellant, and Cross-Appellee, v. Robert E. FERGUSON, d/b/a Bob Ferguson Agency, Defendant-Third-Party Plaintiff-Appellee and Cross-Appellant, v. RICHTER-ROBB, Third-Party Defendant-Appellee and Cross-Appellee.

No. 13315.

Supreme Court of New Mexico.

Nov. 30, 1981.

[97 NM 122] Hinkle, Cox, Eaton, Coffield & Hensley, J. Douglas Foster, Roswell, for plaintiff-appellant, and cross-appellee.

Neal & Neal, William G. W. Shoobridge, Hobbs, for defendant-third-party plaintiff-appellee and cross-appellant

Robinson, Stevens & Wainwright, Paul Wainwright, Albuquerque, for third-party defendant-appellee and cross-appellee.

OPINION

RIORDAN, Justice.

In 1974, plaintiff Roy Exum d/b/a Roy Exum Trucking (Exum) obtained commercial truck insurance through the defendant Ferguson Insurance Agency (Ferguson). Ferguson obtained a policy for Exum with the Occidental Fire and Casualty Company (Occidental) through their general agent Richter-Robb and Company (Richter-Robb). Occidental, in August of 1976, notified Richter-Robb that Exum's coverage was going to be cancelled. Richter-Robb then notified Ferguson by phone and memo that the policy was going to be cancelled, but no specific cancellation date was given and neither Ferguson nor Exum ever received an actual notice of cancellation. The policy was cancelled by Occidental as of September 24, 1976. No replacement coverage was provided by Richter-Robb or Ferguson.

On October 6, 1976, Exum's truck and trailer were involved in an accident. As a result of the accident and Exum's inability to repair the truck and trailer, Exum's interstate business ceased and he was unable to make payments on another truck which was subsequently repossessed. He alleged that these events resulted from the lack of insurance coverage that would have enabled him to repair his equipment and continue in business. Exum filed suit against Ferguson for the amount of damage to the truck and trailer, loss of profits and loss of equity in the vehicle that was repossessed. Exum also sued Occidental on various claims. Ferguson filed a cross-claim which was later treated as a third-party complaint, against Richter-Robb. Ferguson's third-party complaint sought indemnification or contribution and was based on theories of negligence and breach of contract. Exum's claim against Occidental was settled prior to trial for $10,750.00.

At trial, the jury returned a verdict in favor of Exum in the sum of $62,617.00 and awarded damages in the same amount by way of indemnity against Richter-Robb in favor of Ferguson. The trial court then granted judgment notwithstanding the verdict for $24,950 plus interest and costs, thereby deleting the damages awarded by the jury for lost profits and loss of equity. We affirm in part and reverse in part.

The issues on appeal are:

1. Whether the trial court properly granted judgment notwithstanding the verdict as to the damages awarded for lost profits and loss of equity in Exum's vehicle.

2. Whether the trial court properly refused to award the cost of Exum's expert witness.

3. Whether the trial court erred in ruling that Richter-Robb indemnify Ferguson for Exum's trailer.

4. Whether the trial court erred in refusing a credit in favor of Ferguson for the amount of settlement paid to Exum by Occidental.

1. Judgment Notwithstanding the Verdict.

Exum claims that he is entitled to damages for all foreseeable injury to him which in this case includes lost profits and loss of equity. Defendant citing Jernigan v. New Amsterdam Casualty Company, 69 N.M. 336, 367 P.2d 519 (1961), claims that Exum is entitled to only those damages which would be covered under the insurance policy, had it not been cancelled.

An insurance policy is a contract. Mitchell v. Intermountain Casualty Company, 69 N.M. 150, 364 P.2d 856 (1961). Under contract principles, an injured party is entitled to all damages that flow as a natural and probable consequence from a breach. Mann v. Glens Falls Ins. Co., 418 F.Supp. 237, 249 (D.Nev.1974), rev'd on other grounds, 541 F.2d 819 (9th Cir. 1976). In Reichert v. General Insurance Company of America, 59 Cal.Rptr. 724, 428 P.2d 860 (1967), vacated for other reasons, 69 Cal.Rptr. 321, 442 P.2d 377 (1968), the plaintiff purchased a 325-unit motel worth $1,500,000. As part of the transaction, he took assignment of four fire insurance policies with a total coverage of $1,375,000. A fire caused $424,000 worth of damage. The insurance companies did not promptly pay the plaintiff for the loss. A bankruptcy followed. The court held that the business of fire insurance is to provide protection. "Insurers are * * * chargable with knowledge of the basic reasons why fire insurance is purchased, and of the likelihood that an improper delay in payment may result in the very injuries for which the insured sought protection by purchasing the policies." Id. at 728, 428 P.2d at 864. Therefore, an insurer's liability is not limited to the amount specified in the policy. "The policy limits restrict only the amount the insurer may have to pay in the performance of the contract * * * they do not restrict the damages recoverable by the insured for a breach of contract by the insurer." Comunale v. Traders & General Insurance Company, 50 Cal.2d 654, 659, 328 P.2d 198, 201 (1958).

The jury found that had Exum been promptly paid for his damages under the insurance policy that he had contracted with Ferguson and Richter-Robb (through Ferguson) for, he would have been able to repair his trucks and continue his business...