Intern. Broth., Etc. v. Hartford Acc. & Indem., 12383.

• Decision Date: 22 May 1978
• Docket Number: No. 12383.,12383.
• Citation: 388 A.2d 36
• Parties: INTERNATIONAL BROTHERHOOD OF PAINTERS AND ALLIED TRADES, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY CO., Appellee.
• Court: D.C. Court of Appeals

Page 36

388 A.2d 36

INTERNATIONAL BROTHERHOOD OF PAINTERS AND ALLIED TRADES, Appellant, v. HARTFORD ACCIDENT AND INDEMNITY CO., Appellee.

No. 12383.

District of Columbia Court of Appeals.

Argued January 3, 1978.

Decided May 22, 1978.

David S. Barr, Washington, D. C., with whom William B. Peer, Washington, D. C., was on the brief, for appellant.

Thomas Penfield Jackson, Washington, D. C., for appellee.

Barry R. Ostrager, Simpson Thacher & Bartlett, New York City, Martin E. Segal & Co.

Before KERN, GALLAGHER and YEAGLEY, Associate Judges.

GALLAGHER, Associate Judge:

Appellant International Brotherhood of Painters and Allied Trades (the Union) filed suit against appellee Hartford Accident and Indemnity Company (Hartford) and an independent insurance consulting firm, Martin E. Segal Company (Segal). With respect to Hartford, the Union requested a temporary restraining order and preliminary injunction,¹ as well as a declaratory judgment and money damages all on account of an alleged breach of contract, arising from Hartford's unilateral cancellation of the policy. Hartford opposed those requests and moved for summary judgment. After appropriate hearings,² the trial court denied the Union's motion for the preliminary injunction and granted Hartford's motion for summary judgment. Upon certification by the trial court under Super.Ct.Civ.R. 54(b) — a procedure brought about by the presence of the other defendant, Segal, to whom summary judgment was not applicable — the Union brought this appeal. It makes three arguments: (1) summary judgment was improper because of the existence of an issue of material fact as to which a genuine dispute exists; (2) the trial court erred in holding that Hartford had the right to cancel the policy; and (3) the court erred by not according controlling weight to testimony and evidence of the entire agreement between the parties.

The Union is the parent organization for approximately 800 local unions of painters, glaziers, and the like, engaged in traditional trade union activities. Its governing board, known as the General Executive Board, consists of the Union's General President, its General Secretary-Treasurer, and seven General Vice Presidents. The Union meets in general convention at five-year intervals. In 1973, in anticipation of a forthcoming general convention in 1974, the Board requested an independent insurance broker, McLaughlin & Co. (McLaughlin) to solicit bids on its behalf from commercial insurance carriers for a group accidental death and dismemberment policy for the Union with the condition that it have a policy for five years with no changes. More particularly, it sought a contract with a premium which would be guaranteed to remain constant for five years.³ The guarantee of a constant premium was sought because the Union budgeted for five-year periods between general conventions, adopting a dues schedule for individual members which would provide the necessary revenues to meet expenses until the next convention.

McLaughlin solicited bids from various carriers, including appellee Hartford, and presented the proposals received from those carriers to the Union's General Executive Board. The Board, with the Union's general counsel participating, considered the proposals at meetings in October and November of 1973. Four carriers had submitted proposals: Hartford, Continental Casualty, General American, and Union Labor insurance companies. Hartford's proposal was generally embodied in a sample policy which contained a provision setting forth a five-year guaranteed rate of $.54 per $1,000.⁴ (Plaintiff's Exhibits Nos. 19 and 20.) It was transmitted to McLaughlin by the manager of the special risk department of Hartford's Washington office. The proposal, however, had been formulated at Hartford's home office in Hartford, Connecticut, under the supervision of an Assistant Vice President.

Sometime following the November 1973 meeting of the Board the Union employed Segal, which had been actuary and consultant to the Union on pension and health plans for many years, to negotiate as its representative for accidental death and dismemberment insurance on better terms than those proposed. The Union's General Secretary-Treasurer instructed Hartford henceforth to deal directly with Segal as the Union's agent. Accordingly, a second sample policy was sent to Segal.⁵ Both sample policies contained a section known as the General Provisions (Section VI) which provided in Paragraph 1 thereof:

Cancellation: The Company may cancel this policy at any time by written notice delivered to the Policyholder or mailed to its last address as shown on the records of the Company stating when, not less than 30 days thereafter, such cancellation shall be effective; and after the policy has been continued beyond the first policy anniversary date the Policyholder may cancel this policy at any time by written notice delivered or mailed to the Company effective on receipt or on such later date as may be specified in the notice. In the event of such cancellation by either the Company or the Policyholder, the Company shall promptly return on a pro rata basis the unearned premium paid, if any, and the Policyholder shall promptly pay on a pro rata basis the earned premium which has not been paid. Such cancellation shall be without prejudice to any claim originating prior to the effective date of such cancellation.

The sample policies also contained a Section VII, known as the Policy Provisions, of which Paragraph 1 stated:

Entire Contract: Changes; This policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance, and no statement made by the Policyholder or by an Insured Person whose eligibility has been accepted by the Company shall be used in defense to a claim hereunder. No change in this policy shall be valid until approved by an executive officer of the Company and unless such approval be endorsed hereon. No agent has authority to change this policy or to waive any of its provisions.

In early February 1974, the General Executive Board met again, and John F. Gentleman, a Vice President of Segal, presented the proposals to the Board, accompanied by a written memorandum stating that the "contractual provisions" of the four proposals, as he saw them, were "similar enough to call even."⁶ With respect to the cancellation clause, Mr. Gentleman advised the Board that it was a "standard" provision which merely permitted Hartford to cancel "in case of non-payment of premiums or some similar circumstances."⁷ In any event, the Union never sought deletion of the cancellation clause.

The Board voted to pursue the Hartford proposal and, on March 4, 1974, Mr. Gentleman wrote to Hartford's Washington special risk manager accepting the Hartford proposal on behalf of Segal's client at an annual premium of $.51 per $1,000 of coverage per member to December 31, 1979, assuming the coverage to be standard, with the amount, age limitations, premium rebates, and payment of commissions yet to be agreed upon. He specified in the letter that "[a]s outlined in your proposal, the annual rate of $.51 per $1,000, based on a guarantee of this rate, will remain in force without change, either upward or downward, until December 31, 1979."

On April 3, 1974, Hartford's home office answered Mr. Gentleman's letter, stating that Hartford was pleased to learn that the proposal had been accepted. It also advised Mr. Gentleman, however, that Hartford was not accepting "any of the terms outlined in . . . [Mr. Gentleman's] letter." Despite that ambiguous disclaimer, the Hartford letter continued by reaffirming its rate guarantee: "[w]e will guarantee that our annual rate of 51¢ per $1,000 of principal sum will remain in force without change, upward or downward, until December 31, 1979 based on an initial effective date of January 1, 1975." (Emphasis added.) In a subsequent paragraph, Hartford advised Mr. Gentleman that "[p]rovisions of the contract, as shown in the proposal, will be the ultimate contractual provisions governing this policy, except as modified by mutual agreement at any future date."⁸

Following clarification of the amount of coverage to be obtained, and the cost, with commissions, to the Union at a premium rate Hartford guaranteed not to raise for five years, the Board voted in June of 1974 to purchase $2,000 coverage for each Union member. The Union's membership approved the action in General Convention in September of 1974, and then voted a monthly dues increase of 9 to 10 cents per member to finance the cost of the insurance.

Effective January 1, 1975, Hartford issued its Policy No. ADD 1796, providing accidental death and dismemberment coverage of $2,000 for each union member at a monthly premium of $.0425 per $1,000 "subject to the limits of liability, exclusions, conditions and other terms of this policy. . . ." Among the "conditions and other terms" was the cancellation clause, Paragraph 1 of the General Provisions (Section VI) which had appeared in both sample policies submitted with Hartford's proposal. The policy omitted the five-year guarantee language which had been in the sample policies submitted by Hartford.⁹

The Union accepted the policy as issued and paid the premiums at the specified rate throughout 1975. Although the Union calculated that Hartford had actually netted approximately $38,000 in 1975, Hartford calculated its 1975 experience as entailing nearly a $95,000 net underwriting loss on the policy. In November of 1976, confronted with what was then projected to be a net underwriting loss for the current year in excess of $100,000 (and an estimated loss for the entire five-year period of more than $500,000), Hartford sent its local special risk manager to attempt to negotiate a substantial premium increase or a reduction in coverage or else to cancel the policy. The General Secretary-Treasurer of the Union refused to renegotiate the rates....