Granite State Fire Ins. Co. v. Mitton
| Decision Date | 27 June 1951 |
| Docket Number | Civ. No. 2953. |
| Citation | 98 F. Supp. 706 |
| Parties | GRANITE STATE FIRE INS. CO. v. MITTON et al. |
| Court | U.S. District Court — District of Colorado |
Pershing, Bosworth, Dick & Dawson, Winston S. Howard and Arthur K. Underwood, Jr., all of Denver, Colo., for plaintiff.
L. A. Hellerstein and Wayne D. Calderwood, Denver, Colo., for defendants.
This is an action instituted by the Granite State Fire Insurance Company, in the United States District Court for the District of Colorado, to recover from its agent the sum of $11,612.23, paid to its assured under a contract of insurance. Plaintiff is a corporation organized under the laws of the State of New Hampshire. Defendant, Finance Insurance Agency, is a corporation organized under the laws of the State of Wyoming, and defendant, C. E. Mitton, is a citizen of the State of Colorado and President of the Finance Insurance Agency. Judgment for the plaintiff in the amount prayed for of $11,612.23.
Plaintiff alleges that the defendants were the agents of the plaintiff in the transactions governing liability under the policy, and that due to the negligence and breach of duty of the defendants in failing to follow instructions of the plaintiff and obtain a release of certain of the provisions of the policy, plaintiff was required to pay to the assured the sum set out above. Wherefore, plaintiff prays judgment in that amount.
Early in December, 1947, D. G. Gordon, of the contracting firm of Tunnel Constructors, informed Mitton that he needed some insurance on certain heavy equipment that he was then using on a water works construction project. Mitton inquired of several insurance companies, but was unable to obtain the desired coverage. Finally, he decided to call upon Charles H. Jones, who was then state and general agent for a large number of insurance firms. On January 15, 1948, Mitton called Jones on the telephone and informed him of the insurance he wanted. Among the risks to be covered were those of landslide and flood. The parties arrived at a satisfactory rate and Jones informed Mitton that the insurance would be in the Granite State Company. At this time, Mitton was not an agent for Granite State, but he was an agent for the Utah Home Fire Insurance Company, for which Jones was also state agent. However, Utah Home was not willing to handle the risk, and therefore, the policy was not placed with it. A binder upon Granite State was given on January 16, 1948, and a policy was issued effective as of that date. Under the terms of the policy the risks of landslide and flood were fully covered.
During the first week in February, 1948, Jones had a conversation with Mitton in which it was agreed that Mitton should be appointed agent for Granite State since it was anticipated that Mitton would write additional insurance upon this same machinery in the future, and Granite State was one of the few companies willing to write a policy upon equipment of such a nature. Jones thereupon accomplished certain forms required by the Colorado Statutes and sent them to the Commissioner of Insurance who issued a license to Mitton as agent for Granite State. The license was made effective as of March 1, 1948, for a term of one year.
Shortly thereafter, Granite State informed Jones that it was not willing to carry the risks of landslide and flood and directed Jones to have those risks removed from the policy. Jones thereupon called Mitton and told him that these risks would have to be removed or Granite State would cancel the policy. There is considerable conflict of testimony as to whether Jones referred to both landslide and flood, or whether he only mentioned the landslide risk. However, that is not decisive of the issues in this case for on February 9, 1948, Jones wrote a letter to Mitton directing him to obtain endorsements releasing both of these risks. This letter was received by Mitton who, at that time, noted that flood was also to be removed. Mitton was requested a number of times to accomplish the endorsements and so relieve the plaintiff of the flood risk. However, he failed to do so, continuously giving Jones some new reason why he could not obtain the assured's signature, but meanwhile, assuring Jones that he would acquire the endorsements as soon as possible. Although Mitton approached the assured upon the removal of the landslide risk, he failed to make any reference whatsoever to the removal of the flood risk. In so doing, Mitton failed to exercise reasonable diligence in seeking the endorsements and, in fact, there was strong evidence that he did not desire to obtain the endorsement for fear of offending a potentially advantageous business associate. On May 30, 1948, Tunnel Constructors suffered a loss of the equipment insured, due to flood, and Granite State, still being bound on the flood risk, was required to pay the claim against it.
Approximately one week after the loss occurred, Mitton wrote to Jones, stating that he regretted his failure to obtain the endorsement before loss occurred, but that he would proceed to obtain the release at once. Shortly thereafter, Mitton did obtain the release as had been originally requested of him. Jones then called upon Mitton and removed from his files the license authorizing Mitton as an agent of Granite State. This license was subsequently cancelled.
The defendants deny the existence of any agency relation with the plaintiff or any breach of duty thereunder, and affirmatively allege that they were acting as insurance brokers throughout the entire transaction and were, therefore, the agents of the insured. Defendants further allege that the license issued by the State of Colorado was defective, and that any loss suffered by the plaintiff was due to the negligence and procrastination of the plaintiff's general agent in not cancelling the policy before the loss occurred.
An insurance broker is one engaged in the writing of insurance who is not attached to any particular company, but procures the business and then...
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