Hallas v. Boehmke and Dobosz, Inc.

• Decision Date: 14 January 1997
• Docket Number: 15490,Nos. 15489,s. 15489
• Citation: 239 Conn. 658,686 A.2d 491
• Court: Connecticut Supreme Court
• Parties: Charles HALLAS et al. v. BOEHMKE AND DOBOSZ, INC., et al. Charles HALLAS et al. v. SCOTTSDALE INSURANCE COMPANY.

Page 491

686 A.2d 491

239 Conn. 658

Charles HALLAS et al. v. BOEHMKE AND DOBOSZ, INC., et al.

Charles HALLAS et al. v. SCOTTSDALE INSURANCE COMPANY.

Nos. 15489, 15490.

Supreme Court of Connecticut.

Argued Oct. 31, 1996.

Decided Jan. 14, 1997.

James J. Carroll, New Haven, for appellants-appellees in Docket No. 15489 (defendants in the first case).

Kevin A. Coles, Westport, for appellees-appellants in Docket No. 15489 and the appellants in Docket No. 15490 (plaintiffs in both cases).

Brian M. Gildea, with whom, on the brief, was Robin Stevens, New Haven, for appellee in Docket No. 15490 (defendant in the second case).

Joan M. Gilbride, pro hac vice, and Philip J. Walsh filed a brief for the appellee in Docket No. 15490 (third party defendant Continental Agency of Connecticut, Inc.).

Before CALLAHAN, C.J., and BORDEN, BERDON, McDONALD and PETERS, JJ.

PETERS, Associate Justice.

In these consolidated appeals, the issues arise out of the negligent failure of an insurance broker to include the names of mortgagees on a property owner's application for fire insurance. The dispositive issues are the extent of liability incurred by the negligent broker and the extent to which the insurer, on agency principles, is liable for the broker's negligence.

In the first case, Docket No. 15489, the plaintiffs, Charles Hallas (Hallas), Patapios Zervos (Zervos), and Henry Nyland (Nyland), ¹ brought an action against the defendants, Boehmke and Dobosz, Inc., and Walter Dobosz (Dobosz), ² alleging that Dobosz negligently had failed to provide insurance coverage for them as mortgagees of property owned by Antonio Alves, and that this negligence entitled them to damages when the insured property subsequently was destroyed by fire. ³ The trial court directed verdicts against Zervos and Nyland for failure to offer sufficient evidence on how they, as junior mortgagees, had been damaged by Dobosz' negligence. After a jury returned a verdict in favor of Hallas for $188,000, the parties stipulated that the amount of the recovery should be $188,200, ⁴ and the trial court rendered a judgment against Dobosz in that amount.

In the second case, Docket No. 15490, the same plaintiffs brought a contract action against the defendant, Scottsdale Insurance Company (Scottsdale), in which they alleged that Scottsdale was responsible for the plaintiffs' fire loss because Scottsdale, through its agent, Dobosz, had issued an insurance binder covering the plaintiffs. The plaintiffs claimed that the issuance of this binder obligated Scottsdale to give them written notice of the cancellation of the insurance policy that Scottsdale had subsequently issued, even though that policy did not list the plaintiffs as insureds. ⁵ Scottsdale filed a third party complaint against Dobosz and Continental Agency of Connecticut, Inc. (Continental), and a counterclaim against the plaintiffs. The trial court directed a verdict in favor of Scottsdale on eight counts of the plaintiffs' complaint and against Scottsdale on its third party complaint and counterclaim.

Dobosz appealed and Zervos and Nyland cross appealed from the judgment in Docket No. 15489; Hallas, Zervos and Nyland appealed from the judgment in Docket No. 15490. Although the appeals were properly filed in the Appellate Court, we transferred them to this court pursuant to Practice Book § 4023 and General Statutes § 51-199(c). We reverse, in part, the judgment of the trial court in the first case and affirm it in the second case.

I

As a result of the evidence presented in the consolidated trial of these two cases, the jury reasonably could have found the following facts. On November 3, 1989, Antonio Alves (Alves) purchased for $300,000 a rooming house located at 331-335 Clinton Avenue in Bridgeport. Alves obtained most of his financing for this purchase from Lois Simpson, trustee, the wife of Hallas. Simpson secured her loan by two mortgages on the property in the amounts of $188,200 and $30,000, respectively. The vendors of the property, Zervos and Nyland, provided a third mortgage to Alves in the amount of $103,214.24. Hallas insisted that Alves obtain fire and extended coverage insurance on the property and spoke with Dobosz on the day of the closing for this purpose.

At the request of Hallas, Dobosz filled out an "Acord Commercial Insurance Application." Because the requested coverage was excess lines insurance ⁶ that, as Hallas knew, Dobosz could not write directly, Dobosz forwarded the application to Continental, an excess lines insurance broker. Continental, in turn, forwarded the application to the Glanvill Agency, which was an agent of Scottsdale; Continental was not an agent of Scottsdale. Glanvill offered to bind the coverage on behalf of Scottsdale, and so informed Continental, which notified Dobosz in turn. After confirming that Alves would accept the offer, Dobosz faxed Continental a request to bind the coverage.

From his conversation with Hallas, Dobosz understood that the beneficiaries of the insurance policy were to include not only the owner, Alves, but also the three mortgagees. Dobosz, however, failed to inform Continental or anyone else, that any mortgagees were to be named on the Alves policy. The certificate from Continental notifying Dobosz of the issuance of coverage listed no mortgagees. Similarly, the policy issued by Scottsdale listed no mortgagees.

Nonetheless, upon receiving information that Scottsdale would provide insurance coverage, Dobosz issued a binder, effective November 3, 1989, until November 3, 1990, identifying Scottsdale as the insurer and including as insured Alves as owner and the plaintiffs as mortgagees. Hallas received a copy of this binder, but Scottsdale did not receive one. The binder provided: "This binder is cancelled when replaced by a policy." When Scottsdale subsequently delivered the Alves policy to Dobosz, Dobosz mailed it to Alves without reviewing its contents to ascertain whether it provided coverage for the mortgagees.

Alves did not have the money to pay the insurance premium. Hallas made a down payment in the amount of $2035 on Alves' behalf; for the remainder of the premium, Dobosz assisted Alves, on November 3, 1989, in entering into a financing arrangement with the Bank of Boston. The Bank of Boston undertook to pay directly to Continental that part of the premium that it had financed. The financing arrangement provided that, in the event of a default by Alves, the Bank of Boston had the right to cancel the Scottsdale policy. The Bank of Boston exercised this right when Alves failed to make his payments as they became due. On January 16, 1990, the Bank of Boston sent to Alves, Dobosz and Continental notices of its intent to cancel and, twenty days later, sent them notices of cancellation. No notices were sent to the mortgagees. On February 15, 1990, Continental mailed a copy of the cancellation notice to Glanvill, Scottsdale's agent, and requested cancellation of the Alves policy. Scottsdale cancelled the policy and refunded the unused part of the premium relating thereto, either to Dobosz or to the Bank of Boston.

Hallas learned that the insurance had been cancelled in May or June, 1990. After a conversation with Dobosz confirming that fact, Hallas also learned that the mortgagees had never been covered by the Scottsdale policy. Upon discovering these facts, Hallas informed the other plaintiffs that the property was uninsured. Hallas also tried, unsuccessfully, to obtain reinstatement of the policy. In July, 1990, after having taken assignment of the first and second mortgages from Simpson, Hallas procured from the Mt. Hawley Insurance Company (Mt.Hawley) other insurance covering his interest in the rooming house. The other two mortgagees did not obtain insurance.

On September 24, 1990, the rooming house was extensively damaged by fire. Hallas filed a claim with Mt. Hawley to recover for his loss. That claim, filed in the United States District Court for the district of Connecticut, had not been resolved at the time that these cases were tried.

II

In the first case, Docket No. 15489, which was grounded on a claim of negligence, Dobosz appeals from the jury verdict finding him liable in damages to Hallas, and Zervos and Nyland cross appeal from the directed verdict against them. Because the issues raised on the appeal and the cross appeal have no relationship to each other, we will consider them separately.

A

In his appeal, Dobosz contends that the trial court improperly: (1) failed to instruct the jury that Hallas had actual notice of the cancellation of the Scottsdale policy; (2) failed to instruct the jury that it could find Hallas equitably estopped because he had actual notice of the cancellation of the Scottsdale policy; (3) failed to instruct the jury that Hallas could not prevail on his claim of negligence without expert evidence about the duty of insurance agents to mortgagees; (4) withdrew from jury consideration exhibits documenting Hallas' lawsuit against Mt. Hawley and documenting the terms of the Mt. Hawley insurance policy; (5) precluded Dobosz from arguing to the jury that Hallas had obtained insurance with Mt. Hawley; and (6) failed to direct a verdict in favor of Dobosz on the ground that Hallas' knowledge of the cancellation of the Scottsdale insurance policy and his subsequent procuring of insurance from Mt. Hawley were intervening acts that superseded Dobosz' negligence as a matter of law.

Most of these claims of impropriety flow from the same basic premise. Dobosz does not contest, in any serious fashion, that he was negligent in failing to include the mortgagees in the application for coverage from Scottsdale and in failing to check the terms of the Scottsdale policy before he mailed it to Alves. He maintains, however, that the trial court improperly impaired his ability to show that his negligence was not the proximate cause of Hallas' losses. He argues that he was relieved of all liability...