Massachusetts Bonding & Ins. Co. v. Orkin Exterminating Co., A-11416

• Decision Date: 31 May 1967
• Docket Number: No. A-11416,A-11416
• Citation: 416 S.W.2d 396
• Parties: MASSACHUSETTS BONDING AND INSURANCE CO. et al., Petitioners, v. ORKIN EXTERMINATING COMPANY, Inc., Respondent.
• Court: Texas Supreme Court

Page 396

416 S.W.2d 396

MASSACHUSETTS BONDING AND INSURANCE CO. et al., Petitioners, v. ORKIN EXTERMINATING COMPANY, Inc., Respondent.

No. A-11416.

Supreme Court of Texas.

May 31, 1967.

Rehearing Denied July 19, 1967.

The Kempers, T. M. Kemper, John D. Richardson, Houston, Graves, Dougherty, Gee & Hearon, J. Chrys Dougherty, Austin, for petitioners.

Butler, Binion, Rice, Cook & Knapp, Robert H. Singleton, Houston, Wilson, Kendall, Koch & Randle, Will Wilson, Austin, for respondent.

HAMILTON, Justice.

This a suit on a retrospective rating plan general liability policy. Both petitioners, defendants and appellees below, and respondent, plaintiff and appellant below, filed motions for summary judgment. The trial court granted petitioners' motion and rendered a take nothing judgment. The Court of Civil Appeals reversed and rendered judgment for respondent in the sum of $54,621, plus interest. 400 S.W.2d 20. Petitioners here are Massachusetts Bonding, hereinafter referred to as the Company, and its successor in interest.

Gulf Coast Rice Mills sued respondent Orkin for damages arising from the application of Lindane, a pesticide, to the rice mill's facilities. Judgment in favor of Rice Mills became final. Orkin Exterminating Company, Inc. v. Gulf Coast Rice Mills, 362 S.W.2d 159 (Tex.Civ.App. 1962, writ ref'd n. r. e.), cert. den. 375 U.S. 57, 84 S.Ct. 175, 11 L.Ed.2d 122 (1963). In that case the jury found that Orkin was negligent in the application of Lindane in August of 1955 to the rice and premises of Gulf Coast, which negligence was the proximate cause of damage to the rice. Orkin paid the judgment and demanded reimbursement from petitioner Massachusetts bonding under its multi-state general liability policy issued for the period from January 1, 1955 to January 1, 1956.

Some pertinent provisions of the policy are as follows:

'Coverage C--Property Damage Liability--Except Automobile.

'To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident.

'9. Notice of Accident. When an accident occurs written notice shall be given by or on behalf of the insured to the company or any of its authorized agents As soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the injured and of available witnesses.' (Emphasis added.)

Gulf Coast filed suit against Orkin on June 25, 1957. On July 22, 1957, a 'Non-Waiver Agreement' was signed by Orkin as follows:

'It is hereby agreed by and between the Massachusetts Bonding and Insurance Company and the Orkin Exterminating Company, Inc. that no action heretofore or hereafter taken by the Massachusetts Bonding and Insurance Company shall be construed as a waiver of the right, if any, of the Massachusetts Bonding and Insurance Company to deny liability to the Orkin Exterminating Company, Inc. under a policy of insurance which is claimed by the Orkin Exterminating Company, Inc. to cover claims asserted or which may hereafter be asserted by R. L. Williams and J. M. Chumney, doing business as a partnership under the name of Gulf Coast Rice Mills, as either the bases of the suit brought in its name as Plaintiff in Cause No. 488,534 against Orkin Exterminating Company, Inc. as Defendant therein in the District Court of Harris County, Texas, or otherwise.

'It is also agreed that by the execution of this agreement the Orkin Exterminating Company, Inc. does not thereby waive any right under the said policy. * * *'

The Company denied liability on two grounds: First, it asserted that the application of Lindane was not an 'accident' within the coverage of the policy; it further contended that, even if it was an 'accident,' notice thereof was not given 'as soon as practicable,' for the incident occurred in August of 1955 and notice was not given until May 24, 1956. Orkin contends that the incident was an 'accident' and that the Company waived the defense of late notice by charging and collecting premium based on the Gulf Coast claim. There seems to be no contention that notice of the alleged 'accident' was given as 'soon as practicable.'

The Court of Civil Appeals rendered summary judgment for respondent, holding that the application of Lindane was an accident, and that as a matter of law petitioners waived the notice of accident requirement by charging a retrospective premium based on the Gulf Coast claim. Petitioners' points of error here are, (1) petitioners' action with regard to the retrospective rating plan of premium payment was not a waiver or estoppel; (2) the nonwaiver agreement precluded any waiver or estoppel; (3) the damages for which Orkin was held liable were not 'caused by accident' within the coverage of the policy; (4) in the alternative, triable issues of fact were raised by the pleadings, depositions, admissions and affidavits. We shall consider petitioners' points of error in that order.

Petitioner's first point presents the question of whether the retrospective premium computations constituted waiver of the notice of accident or an estoppel to assert breach thereof, as a matter of law.

The process by which retrospective premiums were computed under the policy is rather complex, but briefly it involved recomputation of premiums based on Incurred losses: 'Losses actually paid,' 'reserves for unpaid losses as determined by the Company,' and 'allocated loss expense.' Two such computations are relevant here, the first in August or September of 1956 and the second in August or September of 1957.

The Court of Civil Appeals held:

'(P)rior to the time appellee secured the nonwaiver agreement it had charged and collected a premium $1,000.00 in excess of that it would have been entitled to collect had not this claim been considered an 'incurred loss'. At the end of eighteen months after the termination of the first policy year it had recomputed the premium as required by the policy because all claims had not been settled, and the retrospective premium did not exceed the maximum. This computation was furnished to appellant before the non-waiver agreement was presented and reflected an additional premium charge by reason of the fact that the reserve for the Rice Mill claim was increased and included in 'incurred losses'.'

We do not agree with this interpretation of the record by the Court of Civil Appeals. That court necessarily relied upon the Company's answers to interrogatories propounded by Orkin. Orkin asked whether Massachusetts Bonding considered the Gulf Coast claim in any way in making the first and second retrospective computations. The Company answered yes, the reserve for the Gulf Coast claim was $1,000 when the first computation was made; the incurred loss was increased to $10,000 in January, 1957.

However, Orkin has introduced certain other documents in this record which show that no premium was charged or collected until after the nonwaiver agreement was signed July 22, 1957. The Company furnished Orkin a claim analysis for the first retrospective premium which showed that No incurred losses had been established for general liability property claims in the State of Texas at the time the first retrospective premium was computed. A credit bill from the insurance agent dated September 28, 1956, showing a return premium of $37,569, was attached as a covering document. From this it appears that no premium was charged for the Gulf Coast claim in the first retrospective premium adjustment.

The charge for the second retrospective premium adjustment was made on September 16, 1957, as shown by an invoice of that date. This was after the nonwaiver agreement was signed, and for that reason cannot effect a waiver or estoppel. The Company admitted establishing a reserve and increasing it to $10,000 in January of 1957; furthermore, a second claim analysis bearing a date of July 15, 1957 (some seven days before the nonwaiver agreement was signed) was submitted to Orkin showing a $10,000 incurred loss for the Gulf Coast claim. These preliminary bookkeeping steps do not establish waiver or estoppel as a matter of law.

Orkin contends further that in this case the retrospective premium was permitted by the insurer to become final after a third retrospective computation as of July 1, 1958. However, this also occurred after the signing of the non waiver agreement. We hold that the nonwaiver agreement has the effect of holding the computation of the premium allocable to this claim open for future adjustment after the liability of petitioners to respondent has been determined. Therefore, the premium computation relative to this specific claim did not become final, and it could not effect a waiver of, or estoppel to assert, the policy defense. Petitioner's first point is sustained. The Court of Civil Appeals erred in holding that Orkin was entitled to judgment as a matter of law.

Petitioners contend by their second point that they are entitled to summary judgment because the nonwaiver agreement, as a matter of law, prevents he raising of estoppel or waiver. They point to the language of the agreement providing that 'no action Heretofore or hereafter taken by the Massachusetts Bonding and Insurance Company shall be construed as a waiver * * *.' (Emphasis added.)

The Court of Civil Appeals held that Orkin preserved its right to plead and prove waiver of policy conditions by reason of actions of the insurer in the clause in the nonwaiver agreement reading: 'It is also agreed that by the execution of this agreement the Orkin Exterminating Company, Inc. does not thereby waive any rights under the said policy.' This Court construed virtually identical language in New Amsterdam Casualty Co. v. Hamblen, 144 Tex. 306, 190 S.W.2d 56 (1945). There the assured sought to...