Keller Lorenz Co., Inc. v. Insurance Associates Corp.
| Decision Date | 08 November 1977 |
| Docket Number | No. 11823,11823 |
| Citation | 570 P.2d 1366,98 Idaho 678 |
| Court | Idaho Supreme Court |
| Parties | KELLER LORENZ COMPANY, INC., a Washington Corporation, dba Payette Vinegar & Cider Co., Plaintiff-Respondent, v. INSURANCE ASSOCIATES CORPORATION, an Idaho Corporation, and R. J. Marmillion,an Individual, Defendant-Appellant. |
Phillip M. Barber of Elam, Burke, Jeppesen, Evans & Boyd, Boise, for plaintiff-respondent.
The plaintiff respondent Keller Lorenz Company, Inc., is a Washington corporation doing business as the Payette Vinegar & Cider Company. On August 14, 1973, fire destroyed a warehouse owned by the plaintiff along with personal property stored inside and around the building. The defendant appellant R. J. Marmillion is president of the defendant appellant Insurance The issues in this case separate into two categories those dealing with liability and those dealing with proof of damages.
Associates Corporation. This suit arose out of the plaintiff's allegations that in the weeks immediately preceding the fire Marmillion had agreed to insure certain personal property on the warehouse grounds, but had failed to do so, and because of this omission the personal property destroyed by fire was uninsured. The defendants denied that Marmillion had agreed to insure the property in question. The case was tried upon two theories: (1) that the plaintiff had been damaged by the defendants' negligent breach of a professional duty to insure the plaintiff's property, and (2) that the plaintiff had been damaged by the defendants' breach of a contract to procure insurance on the property. The jury found for the plaintiff on both counts and awarded damages for the value of the uninsured property destroyed by the fire.
This is the third case in which this Court has recently considered the liability of an insurance agent or agency for failure to provide insurance on property which is later destroyed. Defendants argue that this case is more like Benner v. Farm Bureau Mutual Insurance Co. of Idaho, Inc., 96 Idaho 311, 528 P.2d 193 (1974), in which the insurance agent was not found liable for damages to the insured or would-be insured, than it is like McAlvain v. General Insurance Co. of America, 97 Idaho 777, 554 P.2d 955 (1976), in which the insurance agent was found liable. We must discuss the facts and pleadings in this case at some length in order to determine whether Benner or McAlvain controls.
The complaint as amended alleged that in the weeks preceding the fire Marmillion had agreed to procure a fire insurance policy which would be effective on August 1, 1973 (the date an existing policy on the warehouse would expire), and which would cover 100% of the value of the personal property involved in this suit. The complaint further alleged that after the fire Marmillion had notified the plaintiff that he had not procured insurance covering that property and that he had told them that they were not covered. The complaint grounded one count in tort for the defendants' negligent breach of a professional duty to procure insurance and one count in contract for breach of an agreement to procure insurance. Neither the original complaint nor the amended complaint, which was filed after the defendants filed their answer, joined any insurance company as a co-defendant or sought recovery against an insurance company for which the defendants were agents.
The defendants in their answer denied the allegation that Marmillion had agreed to obtain insurance for the personal property destroyed by the fire. Furthermore, they did not plead in the alternative that if Marmillion made such an agreement as agent of a particular insurance company then, based upon Benner v. Farm Bureau, supra, he had bound that insurance company by his oral agreement and thereby procured insurance. Thus, defendants did not indicate in their answer, nor did they later indicate by any other pretrial document appearing in this record, that they also intended to rely at trial upon an alternative defense that Keller Lorenz had a binding contract of insurance with the insurance company bound by Marmillion's oral binder. See Benner v. Farm Bureau, supra.
At trial several witnesses employed by the plaintiff Keller Lorenz, including Keller Lorenz' principal stockholder-officers, testified that Marmillion had visited their offices shortly before the fire and one of the stockholder-officers testified that Marmillion had inspected the warehouse and agreed to insure the personal property on the warehouse grounds. Marmillion denied this in his testimony. Marmillion did testify that he had authority to orally bind several insurance companies for which he was an agent.
Following the presentation of evidence, the defendants requested the court to instruct the jury that if Marmillion agreed to insure Keller Lorenz, this constituted an The court instructed the jury that the plaintiff grounded its claims in two counts: breach of contract to procure insurance and negligent breach of a duty to procure insurance. A special verdict form was submitted to the jury asking it to answer questions concerning each of these counts. The jury returned a verdict for the plaintiff on both counts, finding that the defendants had negligently failed to procure insurance for the plaintiff and that the defendants had breached a contract to procure insurance for the plaintiff and assessed damages of $27,550. The court denied the defendants' motion for a judgment notwithstanding the verdict and entered judgment on the verdict from which this appeal was taken.
oral binder contract between Keller Lorenz and an insurance company and that, consistent with Benner v. Farm Bureau, supra, the defendants would not be personally liable under that contract. The court refused these instructions.
The defendants first argue that the special verdict was inconsistent because they characterize it as finding that (1) the defendants negligently failed to procure insurance, and (2) the defendants had made a contract insuring the property at the warehouse, which contract was then breached. However, the jury did not find that defendants had made a contract insuring the property at the warehouse. Rather, it found that the defendants had contracted to procure insurance upon that property and breached that contract by failing to procure insurance. The jury's findings are not inconsistent. In a case such as this, the failure to obtain insurance can be both a breach of a contract to provide insurance and a negligent breach of a professional duty to provide insurance. As we explained in McAlvain, and as was more fully explained in Hellbaum v. Burwell & Morford, 1 Wash.App. 694, 463 P.2d 225 (1969), which was cited in McAlvain, recovery may be grounded in either theory or both, although double recovery is not allowed. The argument that the special verdict is inconsistent is without merit.
The defendants make a second argument that they are not liable in tort or contract to the plaintiff because if Marmillion agreed to procure insurance, then this amounted to an oral binder which obligated an insurance company, thereby fulfilling the defendants' contractual and professional duties. They argue that as agents making the contract they are not liable under the contract, based upon this Court's decision in Benner. In Benner we held that an insurance agent who agreed to insure the plaintiff on behalf of a disclosed principal was not liable for the plaintiff's losses because he had apparent authority to bind the principal to an insurance contract. This was based upon the familiar agency rule that an agent for a disclosed principal who actually binds the principal is not personally liable for breach of the insuring agreement by the insurer. In this case, although the defendants denied that they agreed orally to bind the insurance coverage with any company, the jury found that they did orally agree to bind the coverage. Thus, the defendant was acting as the agent of a partially disclosed principal, i. e., Keller Lorenz knew the defendant was acting as agent for some principal, but did not necessarily know for which principal the agent was acting. Restatement (Second) of Agency § 4(2) (1957). In this situation, the agent is party to the contract as a principal and liable under it. Restatement (Second) of Agency § 321 (1957). Cf. McCluskey Commissary, Inc. v. Sullivan, 96 Idaho 91, 524 P.2d 1063 (1975).
This defense of the appellants that, as agents, they bound a company so that they themselves are not personally liable surely falls within I.R.C.P. 8(c)'s definition of affirmative defenses as "any . . . matter constituting an avoidance or affirmative defense." Because this defense depends upon proof of matters unrelated to the allegations in the complaint, matters which the plaintiff may not anticipate or be prepared to litigate without warning, I.R.C.P. 8(c) required the defendants to give notice in their pleadings that they intended to rely upon the defense. Had this defense been pleaded, the plaintiff A review of the record shows that the agency defense was not tried by the express or implied consent of the parties and that asserting it now would prejudice the plaintiff who would not be able to bring in the insurance company as a co-defendant at this stage of the proceedings. Therefore, the consideration of this issue would not fall within the I.R.C.P. 15(b) exception to submissions of issues which are not presented by the pleadings, but which are tried with the express or implied consent of the parties. Having failed to assert the agency defense at an appropriate time, the defendants cannot rely on it at trial or in this appeal. See Lynch v. Cheney, 98 Idaho 238, 241-242, 561 P.2d 380 (1977), for a more thorough discussion of the question of whether issues not presented in the pleadings have been litigated with the...
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