First Nat. Ins. Agency, Inc. v. Leesburg Transfer & Storage, Inc., 2585

• Citation: 139 So.2d 476
• Decision Date: 28 March 1962
• Docket Number: No. 2585,2585
• Parties: FIRST NATIONAL INSURANCE AGENCY, INC., Appellant, v. LEESBURG TRANSFER & STORAGE, INC., Appellee.
• Court: Court of Appeal of Florida (US)

Page 476

139 So.2d 476

FIRST NATIONAL INSURANCE AGENCY, INC., Appellant, v. LEESBURG TRANSFER & STORAGE, INC., Appellee.

No. 2585.

District Court of Appeal of Florida, Second District.

March 28, 1962.

Monroe E. McDonald, Sanders, McEwan, Schwarz & Mims, Orlando, for appellant.

Walter Warren, Leesburg, for appellee.

ALLEN, Acting Chief Judge.

Defendant has appealed from a final judgment in favor of plaintiff in action at law tried before the lower court without a jury. The theory of plaintiff's complaint was that defendant had breached an oral contract to procure and provide additional insurance coverage on plaintiff's building to the resulting detriment of plaintiff when said building was destroyed by fire. The recovery sought was the total amount of additional insurance alleged to have been contracted for.

At all times material, plaintiff's building was insured against fire loss under two separate written insurance contracts for the total amount of $17,000. These policies had been procured by defendant for plaintiff from two out-of-state insurance companies. Plaintiff filed his complaint for defendant's alleged breach of an oral contract to obtain additional insurance for plaintiff in the amount of $17,000, in other words, to double the amount of insurance on plaintiff's building.

In December of 1958, or thereabouts, an alleged discussion took place between plaintiff's president, Fred Duncan, and defendant's general manager, L. A. LeMaster. During this discussion, plaintiff alleged in its complaint that Duncan asked LeMaster to double the existing insurance on plaintiff's building and that LeMaster agreed to do so immediately. The insurance was, however, never thereafter increased. In July of 1959, plaintiff received renewal certificates to reflect the annual renewal of its already existing insurance coverage of $17,000. In November of 1959, the insured premises were completely destroyed by fire and plaintiff alleged that it, for the first time, learned that the insurance had not been doubled as requested. The aforementioned written insurance policies and the renewal certificates issued in July, 1959, were attached to the complaint. Defendant's motion to dismiss the complaint for failure to state a cause of action was denied whereupon defendant answered.

In its answer defendant denied the existence of any agreement to double the insurance. In addition, the answer pleaded, among others, the affirmative defenses of estoppel and failure of consideration. Plaintiff filed a motion to strike the several affirmative defenses on the grounds that either separately or collectively they did not constitute a legal defense to the complaint. The lower court without opinion ordered the affirmative defenses stricken apparently on the grounds proposed in the motion to strike, to-wit: that the defenses raised did not constitute legal defenses to the complaint. Said order did not grant defendant leave to amend its answer, nor did it deny same. Neither did defendant move the court to permit an amendment.

The cause was therefore tried on the issues of the existence vel non of an oral agreement by defendant to provide additional insurance coverage, the breach thereof and the amount of damages recoverable. The only direct testimony going to whether or not such an agreement had been made was elicited from plaintiff's president, Duncan, and defendant's general manager, LeMaster. Duncan testified that at the time of the alleged discussion between himself and LeMaster he had become concerned over increased fire hazards to plaintiff's building which were being caused by plaintiff's tenant. He mentioned to LeMaster that the cost to replace the building would be $35,000 and he instructed LeMaster to therefore double the then existing coverage of $17,000. Duncan further testified that LeMaster said he would take care of it.

LeMaster's testimony was in direct conflict with that of Duncan. Though he recalled discussing insurance matters, many of which are unrelated to the questions involved, with Duncan at frequent intervals during late 1958 and early 1959, he denied any particular recollection of the discussion at which Duncan contended he asked for an increase in coverage. Specifically, LeMaster denied that Duncan ever made such a request of him.

No direct testimony was produced by either side to corroborate respectively the affirmative testimony of Duncan or the negative testimony of LeMaster. Plaintiff's bookkeeper and office manager, Mrs. Sarah Meachen, recalled that Duncan and LeMaster discussed in her presence matters concerning fire hazards and increasing insurance in late 1958. She did not testify that Duncan requested an increase in coverage in her presence but stated that Duncan and LeMaster left her office on the day in question, apparently continuing their discussion outside.

Toward the close of the evidence, the defense offered into evidence as exhibits copies of the two renewal certificates reflecting total coverage of $17,000 which had been issued and received by plaintiff in July, 1959. Copies of the same certificates were attached to the complaint. These exhibits were admitted by the court without objection. Subsequently, the lower court entered final judgment in favor of plaintiff in the amount of $17,000 together with interest and costs. This amount equalled the amount of additional insurance alleged by plaintiff to have been contracted for.

Defendant-appellant's first point on appeal is that the complaint did not state a cause of action and the lower court therefore erred in denying defendant's motion to dismiss. The ultimate facts alleged in plaintiff's complaint are that defendant, a general insurance broker, breached an oral agreement with plaintiff to procure additional insurance on plaintiff's premises with a company or companies for which defendant was authorized to write insurance. Defendant as broker is therefore alleged to have breached its agency agreement with plaintiff as principal.

Reduced to fundamentals, the question before this court under the facts of this case is can an insurance broker, as agent of an insured, be held to respond in damages resulting from its breach of an agreement with the insured to procure insurance. Surprisingly, insofar as an action at law is concerned, the instant case appears, narrowly speaking, to be one of first impression in this state, although the Supreme Court in Collins v. Aetna Ins. Co., 1931, 103 Fla. 848, 138 So. 369, acknowledged that a parol contract to insure could be specifically enforced in equity against a broker. However, the liability of a broker for damages resulting from a failure to provide insurance, having agreed so to do, is elsewhere almost universally recognized. The cause of action was given succinct expression in Gay v. Lavina State Bank, 1921, 61 Mont. 449, 202 P. 753, 755; 18 A.L.R. 1204, as follows:

'And as between the insured and his own agent or broker authorized by him to procure insurance there is the usual obligation on the part of the latter to carry out the instructions given him and faithfully discharge the trust reposed in him, and he may become liable in damages for breach of duty. If he is instructed to procure specific insurance and fails to do so, he is liable to his principal for the damage suffered by reason of the want of such insurance. The liability of the agent with respect to the loss is that which would have fallen upon the company had the insurance been effected as contemplated. Negligence on the part of the agent defeating in whole or in part the insurance which he is directed to secure will render him liable to his principal for the resulting loss. * * *'

The breach of the broker's duty to procure insurance is indicated in the above quotation and has elsewhere been held to sound in negligence as well as in contract. Elam v. Smithdeal Realty & Ins. Co., 1921, 182 N.C. 599, 109 S.E. 632; 18 A.L.R. 1210. In the latter case the trial court nonsuited the plaintiff in his action to recover damages for breach of a contract to procure a policy of insurance protecting plaintiff's automobile against collision damage. The defendant had contracted to provide insurance against various risks including collision. The policy was in fact procured but it was lacking in any collision coverage. A collision occurred, and the plaintiff not being protected against it under the policy brought the action against his broker for failing to provide such protection. The Supreme Court of North Carolina rejected the contention that the policy as issued expressed the contract between the parties and held that said policy did not have 'the effect of shutting off prior or contemporaneous parol inducements and assurances in contravention of the written policy.' In reversing the nonsuit the court further held that the complaint against the broker for failing to perform a duty he had undertaken stated a cause of action. In so doing the Court also discussed and disposed of other questions which are pertinent to the instant appeal.

On the question of consideration, the Court held that the promise to take a policy was sufficient consideration for the broker's undertaking to carry out his instructions with respect to the policy, thus intimating that the actual payment of premiums or promise to pay them is not essential to the existence of a valid contract to insure. One of the defenses stricken in the instant case was failure of consideration, which will be discussed more fully later.

In the Elam case, supra, there was also evidence that the plaintiff had received the policy in question before the collision occurred and therefore had an opportunity to discover that collision coverage had not been provided. The Court noted that since the theory of the action brought sounded in contract and no tort, any 'negligence' on the part of the plaintiff which 'contributed' to his injury could properly be considered on the issue of damages. The Court...