Gulf Insurance Company v. Kolob Corporation, 9803.

• Decision Date: 17 January 1968
• Docket Number: No. 9803.,9803.
• Citation: 404 F.2d 115
• Parties: GULF INSURANCE COMPANY, Inc., Appellant, v. The KOLOB CORPORATION, Inc., Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

404 F.2d 115 (1968)

GULF INSURANCE COMPANY, Inc., Appellant, v. The KOLOB CORPORATION, Inc., Appellee.

No. 9803.

United States Court of Appeals Tenth Circuit.

December 6, 1968.

Rehearing Denied January 17, 1968.

George L. Vargas, Reno, Nev. (Gordon R. Strong, Salt Lake City, Utah, Vargas, Bartlett & Dixon, Reno, Nev., and Strong & Hanni, Salt Lake City, Utah, with him on the brief), for appellant.

Harold G. Christensen, Salt Lake City, Utah (Robert M. Anderson, Worsley, Snow & Christensen, and Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, with him on the brief), for appellee.

Before LEWIS, SETH and HICKEY, Circuit Judges.

SETH, Circuit Judge.

Appellant, Gulf Insurance Company, Inc., brought this action against the appellee, The Kolob Corporation, Inc., to recover the amount of a judgment and costs which the appellant had paid in an action brought against it on a fire insurance policy. Appellee was a former general agent of appellant insurance company, and the fire loss had occurred on property insured by the appellant under a policy which it asserts should have been cancelled by the appellee before the loss.

The case was tried to a jury which found for the appellant in an amount less than the amount sued for. The lesser amount was apparently awarded in accordance with instructions from the court that the appellant could only recover a fractional amount of the loss. However, the trial court upon motion of the appellee set aside the jury verdict and directed a verdict in favor of the appellee.

The appellant on this appeal urges that the trial court was in error in directing the verdict and in giving and refusing certain instructions.

The record shows that the appellant was engaged in the fire insurance business and had entered into a general agency contract with appellee. A substantial amount of insurance had been written for appellant through the agency including the fire insurance policy in question. Appellant thereafter terminated the general agency agreement with the appellee, and arrangements were made whereby appellee would continue to collect and remit certain premiums and would also handle the cancellation of outstanding policies.

Pursuant to this arrangement, the appellant requested appellee to cancel a substantial number of policies, including the policy here in issue. The request for cancellation pertinent to this appeal was made in writing on November 19, 1962; however, appellee did not cancel the policy, and on December 31, 1962, the insured property was destroyed by fire. The insured recovered a judgment against appellant in an action brought on the policy in Nevada. In connection with this litigation, appellant incurred certain adjustment costs, attorneys' fees and expenses. This action was then commenced by appellant to recover the amount of this judgment and the additional fees and expenses from appellee.

The record also shows that during the period the policy and the general agency agreement were in effect, an officer of the appellant became concerned about the nature of the risk and requested the appellee to arrange for reinsurance. This was done, and several other companies, procured by the appellee, reinsured appellant on this risk to the extent of four-fifths of the face amount of appellant's policy. This reinsurance was evidenced by a certificate of reinsurance which shows on its face that it covered policy No. C-6167002, which was the policy in question. The certificate listed the reinsuring companies thereon with the amounts ceded. This reinsurance was secured and the certificate issued by the appellee.

The basic issue raised by the complaint and which was developed during the trial of the case was whether or not an unreasonable period of time elapsed following the request by the appellant that the appellee cancel the policy, and thus whether or not the appellee was negligent in not taking action prior to the date of the fire loss. As the trial court instructed the jury: "There is no dispute, I think, in this case as to the fact that Kolob Corporation agreed to handle the cancellation of Gulf policies upon the request of Gulf. The dispute is rather about how they were to do it and within what time should they do it."

The jury returned a verdict for appellant and the defendant-appellee moved that the verdict be set aside on the ground that there was no evidence of negligence sufficient to support the verdict, and there was no showing that the six weeks' delay was an unreasonable time to effect the cancellation under the circumstances. The court granted this motion for the reason that there was no evidence that an unreasonable length of time had elapsed, and this in turn, as indicated by the trial court, was based on the testimony of the witness, Mr. Frank Salisbury.

There was however evidence presented relating to the delay from which several conflicting inferences could be drawn by reasonable men. This in our opinion was sufficient for the case to go to the jury in the first instance and was likewise sufficient to prevent the verdict rendered from being set aside.

The request for cancellation was clear and definite. There is no question but what it was received by the appellee, and had been preceded by a request for action upon the prior cancellation of other policies with an indication that difficulties would arise in the event a loss occurred and steps had not been taken to cancel the policies.

The transcript shows that after the termination of the general agency, the appellee was busy with the requests for cancellation, and in attempting to replace the cancelled policies with coverage by other companies in order to accommodate its agents and to assist in retaining their clients. The testimony of Mr. Salisbury upon which the trial court relied was in part as follows: "In view of the conditions we were operating under at that time, with hundreds of cancellations to be processed and being processed in a class of risk that we were working on, six weeks wasn't an unreasonable time to perfect that cancellation." When the witness was cross-examined, he was asked whether if the request had been received and the appellee had waited six weeks and done nothing at all would this be unreasonable, to which the witness replied: "It probably would, if Kolob did nothing, but I don't think they did nothing." The witness, who was president of the appellee corporation at the time, on further examination testified that he did not know of anything that Kolob had done on the request for cancellation. Thus the testimony was that the president of the appellee did not think that six weeks would be an unreasonable time if some action were taken, but he did not know that any action had been taken. In our opinion this testimony together with the other evidence as to the prevailing conditions was sufficient to submit the case to the jury and was sufficient to withstand a motion to set aside the verdict. Thus the trial court was in error in setting aside the verdict and in directing a verdict for the other party.

We held in Readnour v. Commercial Standard Ins. Co., 253 F.2d 907 (10th Cir.), that it is error for the trial court to direct a verdict when the evidence is in conflict and also in the...