Harris v. K & K Ins. Agency, Inc.

• Decision Date: 13 January 1995
• Docket Number: No. 941105,941105
• Citation: Harris v. K & K Ins. Agency, Inc., 453 S.E.2d 284, 249 Va. 157 (1995)
• Court: Virginia Supreme Court
• Parties: Leonard HARRIS v. K & K INSURANCE AGENCY, INCORPORATED, et al. Record

Page 284

453 S.E.2d 284

249 Va. 157

Leonard HARRIS v. K & K INSURANCE AGENCY, INCORPORATED, et al.

Record No. 941105.

Supreme Court of Virginia.

Jan. 13, 1995.

Oldric J. LaBell, Jr., Newport News, for appellant.

Robert L. Hodges, Richmond (E. Duncan Getchell, Jr., McGuire, Woods, Battle & Boothe, on brief), for appellees.

Present: All the Justices.

KEENAN, Justice.

Under the provisions of our Rule 5:42, the United States Court of Appeals for the Fourth Circuit certified to this Court two questions of Virginia law concerning the issue whether the "continuing undertaking" doctrine is applicable in fixing the date from which the statute of limitations runs in a cause of action for breach of contract brought by an insured against an insurance agency and one of its brokers. The facts as stated in the certification order are set forth below.

I.

In 1984, Leonard Harris leased a racetrack known as the Virginia Raceway. The terms of the lease required Harris to maintain insurance coverage, including fire insurance, on the property for the benefit of the racetrack's owners. In accordance with this requirement, Harris obtained insurance coverage through K & K Insurance Agency, Inc. (K & K).

The racetrack owners later questioned whether the insurance coverage was adequate. In response, Harris' wife, Donna, mailed a copy of the lease to Don DeWitt, an employee of K & K, and asked DeWitt to review the document to determine whether Harris had obtained all the insurance coverage required by the lease. DeWitt later returned the lease to Mrs. Harris with a letter, dated March 10, 1988, which stated that "you have all necessary coverage for Virginia Raceway."

On March 26, 1989, a fire at the racetrack destroyed the main building and damaged other improvements. Harris submitted claims for the loss to K & K and, on three occasions, agents of K & K assured him that the claims would be paid. The last occasion on which Harris submitted a claim and received such assurances was February 6, 1990. Thereafter, the insurer, Transamerica Insurance Group, denied the claim. It is undisputed that the policy did not provide coverage for the loss.

In December 1992, Harris filed a motion for judgment against K & K and DeWitt (collectively, DeWitt) in a Virginia circuit court, claiming that DeWitt had breached its contractual duty and was negligent in failing to insure that Harris had obtained the coverage required by the lease for the loss caused by the fire. DeWitt removed the action to the United States District Court for the Eastern District of Virginia based on diversity of citizenship, and the parties consented to reference of the action to a United States magistrate judge for disposition.

DeWitt moved to dismiss the action, arguing that it was barred by the three-year statute of limitations applicable to oral contracts, Code § 8.01-246(4). The magistrate judge agreed that Harris' claim was based on an implied oral contract to provide services, and ruled that Harris' cause of action accrued on March 26, 1989, the date of the fire. The magistrate judge granted DeWitt's motion to dismiss, based on his conclusion that the three-year statute of limitations began to run on the date of the fire, and was not tolled under the continuing undertaking doctrine. Harris appealed the district court's dismissal of his action.

Following Harris' appeal, the certifying court presented the following questions to this Court:

1. Does the continuing undertaking doctrine apply to insurance agents and agencies?

2. On the facts presented, would the continuing undertaking doctrine apply to toll the limitations period from running on these claims until a time within the limitations period?

II.

Harris argues that the services DeWitt rendered on his behalf are similar in nature to services rendered by attorneys, physicians, and accountants. He contends that this Court's application of the continuing undertaking doctrine to ongoing services rendered in those professions supports an extension of the doctrine to cover services performed by insurance agencies and their individual brokers.

Harris asserts that, if the continuing undertaking doctrine is applied to DeWitt's services on his behalf, the three-year statute of limitations began to run on February 6, 1990, the date that DeWitt last assisted him in the processing of his fire loss claim. Thus, Harris concludes that his motion for judgment, filed in December 1992, is not time barred.

In response, DeWitt asserts that the continuing undertaking doctrine is inapplicable here, because DeWitt's work for Harris was not related to a particular undertaking which required continuing professional services. Dewitt argues that each sale, renewal, or other action taken by an insurance agency or broker with regard to a policy is a discrete task, rather than part of a continuing endeavor, and that this distinction precludes application of the continuing undertaking doctrine to the dealings of insurance agencies and their brokers with an insured. We agree with DeWitt.

Initially, we note that this Court has drawn a distinction between an insurance agent, who acts as the agent of the insurer, and an insurance broker, who ordinarily is employed by the person seeking insurance. See Pacific Fire Ins. Co. v. Bowers, 163 Va. 349, 354, 175 S.E. 763, 765 (1934). Although a broker is an agent for the insured, he also may be, at the same time, an agent for the insurer for certain purposes. Id. In answering the certified questions, we confine our response to the facts presented when an insurance broker, and the insurance agency by whom the broker is employed, act as agent for an insured.

The continuing undertaking doctrine operates as a limited exception to the rule requiring strict construction of statutes of limitation. See Westminster Investing Corp. v. Lamps Unlimited, Inc., 237 Va. 543, 547, 379 S.E.2d 316, 318 (1989); Wilson v. Miller, 104...