Klonis for Use and Benefit of Consol. American Ins. Co. v. Armstrong

• Citation: 436 So.2d 213
• Decision Date: 21 June 1983
• Docket Number: No. AO-172,AO-172
• Parties: Nicholis V. KLONIS and Mary E. Klonis, his wife, for the Use and Benefit of CONSOLIDATED AMERICAN INSURANCE CO., Appellants, v. William R. ARMSTRONG, d/b/a Armstrong Insurance Management Co., and Employers Reinsurance Corp., Appellees.
• Court: Court of Appeal of Florida (US)

Page 213

436 So.2d 213

Nicholis V. KLONIS and Mary E. Klonis, his wife, for the Use

and Benefit of CONSOLIDATED AMERICAN INSURANCE

CO., Appellants, v. William R. ARMSTRONG, d/b/a Armstrong Insurance Management

Co., and Employers Reinsurance Corp., Appellees.

No. AO-172.

District Court of Appeal of Florida,

First District.

June 21, 1983.

Rehearing Denied Aug. 24, 1983.

Douglass E. Myers, Jr., of Smith & Myers, Jacksonville, for appellant.

Daniel C. Shaughnessy, of Cowles, Coker, Myers, Schickel & Pierce, P.A., Jacksonville, for appellees.

ZEHMER, Judge.

After careful review, we affirm the order dismissing with prejudice a four-count complaint filed by appellant Consolidated American Insurance Co. (Consolidated) against appellee William R. Armstrong and his liability insurer.

The essential facts alleged in the complaint are not complicated. On November 12, 1977, the Klonis residence was burglarized and personal property valued at $98,000 stolen. Nicholas Klonis and Mary Klonis, his wife (hereafter Klonis), through their insurance agent, Armstrong, had previously obtained a homeowner's insurance policy from Consolidated covering the loss by theft of unscheduled personal property in the residence to the maximum amount of $40,000. A clause in that policy provided that this coverage "shall apply as excess insurance over any other valid and collectible insurance which would apply in the absence of this policy." Sometime after the Consolidated policy was issued, but prior to the burglary, Armstrong orally agreed with Klonis to secure a second policy with Lloyd's of London insuring specifically described articles of personal property in the Klonis residence having a total appraisal value of $128,000. Armstrong obtained the Lloyd's policy for Klonis, but it was cancelled after the burglary retroactively to the date of inception because Armstrong had made material misrepresentations on the policy application without the knowledge and consent of Klonis. Consolidated paid $40,000 to Klonis on his claim for the theft under the unscheduled personal property coverage and in return secured a release and subrogation receipt from Klonis. Klonis also sued Armstrong for the amount of the uncovered loss, settling with him for the $58,000 difference. Consolidated attempted to join that litigation as a real party in interest to recover from Armstrong the $40,000 it had paid, asserting the following

four theories of action in separate counts:

1. Consolidated is contractually subrogated to the cause of action by Klonis against Armstrong for negligence (Count I);

2. Consolidated is contractually subrogated to the cause of action by Klonis against Armstrong for breach of an oral contract (Count II);

3. Consolidated is entitled to recover from Armstrong on a theory of equitable subrogation (Count III); and

4. Consolidated has a direct cause of action against Armstrong for negligence in failing to obtain the valid coverage from Lloyd's (Count IV).

It is not contended by any party that Consolidated's policy required either Klonis or Armstrong to obtain described articles insurance as primary coverage or that Consolidated had a legal right to insist that either of them maintain such underlying coverage if it was obtained. The Lloyd's policy, even if obtained, admittedly could have been cancelled by Armstrong with Klonis's consent for any reason at any time prior to the theft without creating any liability to Consolidated. Consolidated was paid a stated premium for the unscheduled articles coverage that was not to be reduced under any policy provisions in the event its insured obtained the primary scheduled articles insurance referred to in Consolidated's policy.

Consolidated's four-count second amended complaint was dismissed, with leave to amend, for failure to state a cause of action. When Consolidated elected to stand on its allegations and not to amend, the action was dismissed with prejudice.

The first point urged by Consolidated is that in accordance with certain policy provisions and the release and subrogation receipt agreement ¹ it was contractually subrogated to causes of action by Klonis against Armstrong for negligence and for breach of contract arising from Armstrong's breach of the oral agreement to obtain the Lloyd's policy. We readily agree that under those provisions Consolidated became contractually subrogated to causes of action held by Klonis against any persons liable "for the loss" paid by Consolidated. Obviously Consolidated, as subrogee, could sue the burglars or persons fencing the stolen goods if it could locate them. But whether Consolidated could also sue the insurance agent, Armstrong, "for the loss" depends upon the nature and scope of any cause of action Klonis had against Armstrong.

Consolidated contends that, had the Lloyd's policy been in effect, the $128,000 coverage would have exceeded the amount of the total loss and, further, that under Consolidated's excess insurance clause, which Florida courts have held enforceable, Lloyd's would have been responsible for the whole loss and Consolidated would not have been responsible for any portion thereof. Thus, Consolidated concludes, Armstrong's failure to secure valid insurance from Lloyd's caused Armstrong to be liable to Klonis and to Consolidated, as subrogee, for the entire $98,000 loss, without regard to the existence of Consolidated's $40,000 coverage because that was merely "excess" insurance.

Armstrong, on the other hand, contends that under the facts alleged, the "excess" insurance clause in the Consolidated policy did not create any contractual or legal duty that he or Klonis purchase and maintain any amount of primary scheduled personal property coverage; that he undertook by oral agreement to provide insurance coverage Consolidated, suing as a subrogated party, can enforce only those rights of action that Klonis has against Armstrong. 30 Fla.Jur., Subrogation, § 21. Both parties assume Klonis has a cause of action against Armstrong, but neither cites any legal authority defining the extent of Armstrong's liability, although that is the pivotal assumption about which both parties base their respective arguments. Hence, we must first address this issue in order to decide the case.

which would fully protect Klonis against theft of all personal property, scheduled and unscheduled, including the $98,000 loss sustained in the burglary; that he had previously procured $40,000 of coverage for Klonis from Consolidated that covered part of the loss and was valid and collectible; that such amount was paid to Klonis; that the only damages Klonis could recover from Armstrong for failure to obtain the specified coverage was the amount of any uninsured loss, i.e., the $58,000 difference between the total $98,000 loss and the $40,000 coverage; and that when Armstrong settled and paid the $58,000 claim to Klonis, there was no further liability on Armstrong's part to Klonis or, thus, to Consolidated by way of subrogation.

It is well settled in this state that where an insurance agent or broker undertakes to obtain insurance coverage for another person and fails to do so, he may be held liable for resulting damages to that person for breach of contract or negligence. E.g., First National Ins. Agency v. Leesburg Transfer & Storage, 139 So.2d 476 (Fla. 2d DCA 1962); Cat 'n Fiddle v. Century Ins. Co., 200 So.2d 208 (Fla. 3d DCA 1967), vacated in part on other grounds, 213 So.2d 701 (Fla.1968); Caplan v. LaChance, 219 So.2d 89 (Fla. 3d DCA 1969); deMarlor v. Foley Carter Ins. Co., 386 So.2d 22 (Fla. 2d DCA 1980); Duncanson v. Service First, Inc., 157 So.2d 696 (Fla. 3d DCA 1963); Sheridan v. Greenberg, 391 So.2d 234 (Fla. 3d DCA 1981). The damages recoverable from the agent or broker would ordinarily be reduced to the extent that the latter did effectuate some insurance coverage of the claimed loss. See Durbin Paper Stock Co. v. Watson-David Ins. Co., 167 So.2d 34 (Fla. 3d DCA 1964); Cat 'n Fiddle, Inc. v. Century Ins. Co., supra. Damages to the intended insured would usually be "calculated by simply comparing what he would have recovered had the premises been fully insured, with his actual net recovery." deMalor v. Foley Carter Ins. Co., 386 So.2d 22, 24 (Fla. 2d DCA 1980).

In the instant case, the extent of Armstrong's liability to Klonis was the total loss ($98,000) less the amount of insurance coverage already obtained by Armstrong ($40,000) through Consolidated. Consolidated's "excess insurance" clause never took effect because there was not available to Klonis "other valid and collectible insurance which would apply in the absence of this policy." Accordingly, after Klonis received the $40,000 from Consolidated and Armstrong paid Klonis the $58,000 difference, Klonis had no surviving right of action to pass by contractual subrogation to Consolidated. The trial court was correct in dismissing Counts I and II.

As its second point, Consolidated argues that even if not entitled to contractual subrogation, it was nevertheless entitled to equitable subrogation against Armstrong. Consolidated cites a number of Florida decisions recognizing the...