Greenfield v. Insurance Inc.

Decision Date31 August 1971
Citation97 Cal.Rptr. 164,19 Cal.App.3d 803
CourtCalifornia Court of Appeals Court of Appeals
PartiesJack GREENFIELD et al., Plaintiffs and Respondents, v. INSURANCE INCORPORATED, Defendant and Appellant. Jack GREENFIELD and Anna Greenfield, Plaintiffs and Appellants, v. INSURANCE INCORPORATED, Defendant and Respondent. Civ. 1264, 1383.
OPINION

FRANSON, Associate Justice. *

STATEMENT OF THE CASES

On May 3, 1967, Greenfield filed a complaint against Insurance, alleging breach of oral contract, negligence and fraud, based on a failure of Insurance to obtain for Greenfield a business interruption insurance policy covering mechanical breakdown. On March 27, 1969, after a court trial, judgment was entered on the second and third causes of action in favor of Greenfield in the sum of $44,345.42, plus interest at 7 per cent per annum from December 5, 1966, to the date of judgment, for a total of $51,508.32.

On October 20, 1969, Greenfield filed a second complaint against Insurance, seeking damages of one-quarter of a million dollars for loss of value of his business, again on the theories of negligence and fraud arising out of the same facts alleged and presumably proved in the first action. On April 28, 1970, the trial court sustained a demurrer to the second complaint without leave to amend. On May 13, 1970, Greenfield appealed from the order sustaining the demurrer. On November 2, 1970 Insurance filed a motion to dismiss the appeal because no judgment of dismissal had been entered on the order sustaining the demurrer. On November 9, 1970, a judgment of dismissal was entered by the trial court. On November 18, 1970 the record on appeal was augmented to include the judgment. The motion to dismiss appeal No. 1383 was submitted for ruling with the decision on the merits of the appeal.

Greenfield had been in the scrap iron and metal business for many years. Insurance is an insurance brokerage firm and had agency agreements with various companies, including Fireman's Fund. Carbett and Klemm were officers of Insurance. For ten years prior to 1966 Insurance had handled the insurance needs of Greenfield and he relied on their expertise and advice in connection with his insurance matters.

In the early part of 1966 Greenfield purchased an auto shredder for use in his business. The cost of the shredder was in excess of $200,000, and its purchase was financed through the Bank of America. While the shredder was being shipped from South Carolina to Greenfield's place of business, Greenfield talked with Carbett about fire and extended insurance coverage on the shredder, and specifically requested business interruption insurance covering a mechanical breakdown of the shredder. Greenfield advised Carbett of the security obligation to the bank, which called for monthly payments in excess of $5,000, and explained to Carbett the importance of insuring against a breakdown. Greenfield testified that around April 1, 1966, Carbett called him on the telephone to inform him that he had obtained the type of coverage that Greenfield wanted and that 'everything would be covered,' except breakdown caused by flood or earthquake. On April 26, 1966, by memo to Fireman's Fund, Carbett requested the issuance to Greenfield of an 'all-risk' business interruption policy, providing for payments of $500 a day, with the only exclusions to be for flood and earthquake. A copy of this memo was mailed to Greenfield. Carbett testified that on April 28, 1966, he told Greenfield he had obtained the policy he (Greenfield) wanted.

Shortly thereafter an original and a copy of a policy were forwarded by Fireman's to Insurance, who in turn forwarded the original policy to Greenfield and placed the copy in a file. Neither Insurance nor Greenfield read the policy when received. The policy provided fire and extended coverage for loss or damage to the shredder for a three-year period, commencing April 15, 1966, and provided for payments to the insured for business interruption due to 'perils insured,' at the rate of $500 for each work day during the period of suspension of business, excluding the first three days of breakdown. It specifically excluded loss caused by a mechanical breakdown. The premium for the policy was $11,948.

On June 27, 1966, there was a breakdown of the shredder. The shredder was out of operation until July 22, 1966. It ran until October 24, 1966, when it broke down a second time and was inoperative until December 22, 1966. Greenfield expended $1,345.42 to expedite repairs on the shredder during the two breakdowns.

On December 5, 1966, Greenfield was notified by Fireman's that the loss was not covered by their policy.

After learning that he was not covered by the Fireman's policy, Greenfield made contact with an insurance firm at Tacoma, Washington. The firm was an agent of Home Insurance Company, which specialized in 'broiler and machinery' coverage of the type desired by Greenfield. On December 16, 1966, a member of the Tacoma firm wrote Greenfield a letter summarizing the coverage for machinery breakdown that would be available under their business interruption policy. The letter indicated that the insurance would cover, subject to the provisions of the policy, the amount actually expended by Greenfield to repair or replace property damaged by an accidental breakdown; that a 'use and occupancy' endorsement could be written to provide $500 per day coverage for each day of total prevention of operation. The letter referred to the shredder and quoted a three-year advance premium of $6,229. Fire and extended coverage would not be included under the policy. Greenfield turned the letter over to Klemm with instructions to follow through with the coverage. While the Home policy was not received in evidence, the evidence indicates that Insurance was able to obtain for Greenfield a policy in accordance with the letter of December 16, 1966. Carbett testified that the policy from Home included mechanical breakdown and that 'there were no exclusions.' Klemm testified that the insurance was placed, and in response to a question as to whether interruption insurance covering mechanical breakdown was a 'very unusual type of coverage,' responded, 'With most carriers, yes. It does not seem to be with the Home Indemnity Company, however.'

APPEAL NO. 1264

The rules by which this court is bound in considering the sufficiency of the evidence to support a judgment are clear. This court's power begins and ends with a determination of whether or not there is substantial evidence to support the conclusions of the trier of fact. If there is such evidence, we must affirm even though we may feel the judgment is against the preponderance of the evidence. All legitimate and reasonable inferences must be resolved in favor of respondent and we cannot substitute our judgment for that of the trial judge (Continental Dairy Equip. Co. v. Lawrence, 17 Cal.App.3d 378, 382, 94 Cal.Rptr. 887; Callahan v. Gray, 44 Cal.2d 107, 111, 279 P.2d 963).

In considering the issues raised by appellant, we note that no findings of fact and conclusions of law were made. Where findings and conclusions are waived (here by failure to request findings within the time provided by rules of court), every intendment is in favor of the judgment and it must be presumed that the trial judge found all the facts necessary to support the judgment (City of National City v. Dunlop, 86 Cal.App.2d 380, 194 P.2d 788; Block v. Laboratory Procedures, Inc., 8 Cal.App.3d 1042, 87 Cal.Rptr. 778).

There is substantial evidence in the record to support a finding of negligence. There was a duty on the part of Insurance to exercise reasonable care in seeking coverage as requested by Greenfield, and a violation of that duty by not obtaining the coverage or by failing to notify Greenfield that the policy, as issued by Fireman's, excluded such coverage. There is also substantial evidence to support a finding of negligent misrepresentation of a material fact--that Greenfield had the coverage he wanted.

Insurance contends that the judgment must fall due to the absence of a causal relationship between the negligence and fraud and the damages claimed to have been suffered. It also contends that there was insufficient evidence of justifiable reliance to support the fraud judgment, and insufficient evidence of both the fact and quantum of damages.

For Greenfield to recover, Insurance's conduct must have been a legal (proximate) cause of the injury. The foundational element of legal cause is cause in fact. It is necessary to show that the conduct contributed in some way to the injury (here the lack of coverage), so that 'but for' the conduct the injury would not have occurred (Rest., 2d, Torts, §§ 430, 432, subd. 1; 2 Witkin, Summary of Cal.Law, Torts, § 284, [19 Cal.App.3d 811] p. 1484). If the act or omission was a substantial factor in bringing about the result, it will be regarded as a legal cause of the injury (Barclay Kitchen, Inc. v. California Bank, 208 Cal.App.2d 347, 354, 25 Cal.Rptr. 383; Thomsen v. Rexall Drug & Chemical Co., 235 Cal.App.2d 775, 783, 45 Cal.Rptr. 642; Rest., 2d, Torts, § 431). Greenfield requested coverage to insure against a breakdown of the shredder. He was advised by Insurance that they had obtained the coverage for him, when in fact they had not. He relied on their representation and did not look elsewhere for coverage. In December, within a few days after learning that he was not covered, he was able to find a company that would write such coverage. While the Home policy was not received in evidence, the letter from its agent, together with the testimony of Carbett and Klemm that the policy was...

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