Karam v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 04 August 1972
• Docket Number: No. 3926,3926
• Parties: George KARAM, Plaintiff-Appellee, v. ST. PAUL FIRE & MARINE INSURANCE Co., Defendant-Appellant, and A. E. Darbonne, Jr.
• Court: Court of Appeal of Louisiana — District of US

Page 821

265 So.2d 821

George KARAM, Plaintiff-Appellee, v. ST. PAUL FIRE & MARINE INSURANCE Co., Defendant-Appellant and A. E. Darbonne, Jr.

No. 3926.

Court of Appeal of Louisiana, Third Circuit.

Aug. 4, 1972.

Rehearing Denied Sept. 13, 1972.

Writ Granted Oct. 19, 1972.

Shelton & Cline by Thomas R. Shelton, Rayne, for defendant-appellant.

Young & Burson by J. Nilas Young, Eunice, for plaintiff-appellee.

Mouton, Roy, Carmouche & Hailey by Harmon F. Roy, Lafayette, for defendant-appellee.

Before FRUGE , HOOD and DOMENGEAUX, JJ.

HOOD, Judge.

George Karam instituted this action to recover the amount which he paid to third persons as damages resulting from the explosion of a hot water tank in a laundromat operated by him. The suit was filed against plaintiff's insurance agent, A. E. Darbonne, Jr., and the latter's 'Errors and Omissions' insurer, St. Paul Fire & Marine Insurance Company.

The defendants filed a third party action against Maryland Casualty Company, demanding that judgment be rendered solely against that defendant in the event it is determined that Darbonne was negligent and in error. Maryland Casualty Company filed a reconventional demand against Darbonne, demanding indemnification for attorney's fees, expenses and costs.

Judgment was rendered by the trial court in favor of plaintiff and against defendants for the amount claimed. The judgment also rejected the third party demands of Darbonne and St. Paul Fire & Marine Insurance Company. Defendant, St. Paul Fire & Marine Insurance Company, has appealed.

The issues presented are: (1) Was Darbonne negligent in having failed to procure for Karam a liability policy with property damage liability limits of $100,000.00, instead of $10,000.00? (2) If he was negligent in that respect and plaintiff sustained a loss as a result of that negligence, is plaintiff entitled to recover from Darbonne and the latter's errors and omissions insurer, or is his sole recourse against Maryland Casualty Company?

In 1968, plaintiff operated a laundromat in Evangeline Parish. A hot water tank in that establishment exploded on February 20, 1968, and thereafter two suits for property damages allegedly caused by that explosion were instituted against Karam and his liability insurer, Maryland Casualty Company. These two damage suits were settled by compromise agreement for the sum of $18,500.00. Maryland Casualty paid $10,000.00 of that amount, and Karam paid the remaining $8,500.00. No question has been raised as to the reasonableness of that compromise settlement.

At the time this explosion occurred there was in effect a policy of liability insurance issued by Maryland Casualty Company insuring Karam against liability, but providing coverage up to a maximum limit of only $10,000.00 for property damage liability. Karam had obtained that policy through defendant Darbonne, who was doing business as Oberlin Insurance Agency.

For several years prior to February 20, 1968, Karam had procured his insurance coverage through Darbonne. Before this accident occurred Karam had asked Darbonne to issue a general liability policy with 'maximum coverage.' Darbonne had authority to write such a policy, with Maryland Casualty as the insurer, providing coverage for property damage liability up to a limit of $100,000.00, and he intended to procure a policy with that coverage for Karam. In writing to Maryland Casualty Company for the policy, however, he inadvertently, or through error, requested that a policy be issued to Karam providing maximum coverage for property damage liability of only $10,000.00. The policy was issued by Maryland Casualty with the lower limit of liability, as requested, and neither Karam nor Darbonne realized that the smaller limits of coverage had inadvertently been issued until the above mentioned loss occurred.

Two suits for damages arising out of that explosion were filed against Karam and his insurer. When the suits were settled by compromise agreement, Maryland Casualty refused to pay more than the $10,000.00 limit specified in the policy. Since the insurer would pay only $10,000.00 of the amount of the compromise settlement, Karam paid the balance of $8,500.00, and he instituted this suit to recover that sum from Darbonne and the latter's errors and omissions insurer, St. Paul Fire & Marine.

The trial judge concluded that Darbonne was negligent in having failed to issue to Karam a liability policy providing property damage liability coverage up to $100,000.00, and that Darbonne and his errors and omissions insurer, St. Paul Fire & Marine, are liable to plaintiff for the loss which the latter sustained as a result of that negligence. He held that Maryland Casualty is not liable for any part of the loss sustained by plaintiff. Judgment thus was rendered in favor of plaintiff and against defendants, Darbonne and St. Paul, for $8,500.00. As we have already noted, St. Paul Fire & Marine has appealed.

Defendants contend primarily that Karam did not request liability insurance coverage up to $100,000.00 prior to the accident, and that Darbonne did not lead him to believe that he had coverage up to that amount.

Darbonne conceded that before the loss occurred plaintiff requested as much coverage as he could get, and that Darbonne had authority to write or was able to procure property damage liability coverage with limits of $100,000.00. Darbonne stated that he wanted and intended to write or procure the policy for Karam providing coverage with limits of $100,000.00, that he thought that he had done so, and that he did not discover until after the loss had occurred that he inadvertently had obtained a policy for plaintiff which provided a $10,000.00 limit of liability instead of the larger limit which had been intended. Darbonne testified that 'thats what I wanted to write it for $100,000.00. Thats what he wanted.' He stated that he delivered the policy to Karam, 'leaving him to believe with the representation that it was $100,000.00 property damage policy,' and that 'Well, I feel like it was an error on my part and I wrote that letter and I probably made a mistake in writing Ten Thousand ($10,000.00) Dollars. . . . I feel like I was in error probably.'

Plaintiff Karam testified, 'I thought I had the maximum I could get, which was One Hundred Thousand ($100,000.00) Dollars.'

The trial judge concluded that 'A. E. Darbonne committed an error when he failed to deliver to plaintiff Karam $100,000.00 liability and ordered only $10,000.00 of insurance instead,' and that 'the evidence clearly establishes negligence on the part of the agent.' We agree with these findings. Our conclusion is that Darbonne was negligent in failing to procure a policy with a limit of liability of $100,000.00, and that his negligence in that respect caused the loss which plaintiff...