Mitchell v. Aetna Cas. & Sur. Co.

• Decision Date: 01 September 1978
• Docket Number: No. 76-2980,76-2980
• Citation: 579 F.2d 342
• Parties: Dr. Robert A. MITCHELL, Plaintiff-Appellant Cross-Appellee, v. AETNA CASUALTY AND SURETY COMPANY, a Foreign Corporation, Organized and Existing Under the Laws of the State of Connecticut, et al., Defendants-Appellees Cross-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 342

579 F.2d 342

Dr. Robert A. MITCHELL, Plaintiff-Appellant Cross-Appellee, v. AETNA CASUALTY AND SURETY COMPANY, a Foreign Corporation Organized and Existing Under the Laws of the State of Connecticut, et al Defendants-Appellees Cross-Appellants.

No. 76-2980.

United States Court of Appeals Fifth Circuit.

Sept. 1, 1978.

Clyde O. Hurlbert, Biloxi, Miss., for plaintiff-appellant cross-appellee.

Rae Bryant, Gulfport, Miss., for Aetna Casualty & Surety Co.

W. F. Goodman, Jr., Velia Ann Mayer, Jackson, Miss., for Fireman's Fund Ins. Co., et al.

Appeals from the United States District Court for the Southern District of Mississippi.

Before WISDOM, THORNBERRY, and RUBIN, Circuit Judges.

WISDOM, Circuit Judge:

In the wake of Hurricane Camille came adjustors, lawyers, and many disappointed insured property owners. In this insurance litigation arising out of Camille all the parties are dissatisfied with the jury's award. The jury awarded the claimant, Dr. Robert A. Mitchell, the amount he sued for, but he contends that the trial judge erred in allowing interest only from the date of the judgment. The defendant insurance companies argue that the trial court should have directed a jury verdict in their favor, or, at the least, that the court should have given different instructions to the jury. We agree that the instructions did not properly present the case to the jury and that the court should have directed a verdict for the defendants on the issue whether Dr. Mitchell could rely upon an agreement allegedly reached with an insurance appraiser. We therefore reverse and remand for a new trial on the other issues.

On August 17, 1969, Hurricane Camille struck the Mississippi Gulf Coast. Dr. Mitchell owned a complex of two buildings in Gulfport. One was two-storied with apartments upstairs and offices downstairs; the other was a drugstore. Dr. Mitchell alleged that Camille tore the roof from these buildings and that wind and wind-driven rain totally destroyed the property. One could see the sky through two-thirds of the building; plaster dropped in chunks; furniture was soaked.

Dr. Mitchell carried insurance totalling $55,000 on these properties with Aetna Casualty and Surety Company, Fireman's Fund Insurance Company, Granite State Insurance Company, Maryland Casualty Company, and New Hampshire Insurance Company (the Insurance Companies). Dr. Mitchell notified agents for the five companies of his loss. They authorized him to make temporary repairs to minimize losses before the adjustment of his claims.

A Mr. Pray of the General Adjustment Bureau communicated with Dr. Mitchell on behalf of the Insurance Companies. Pray and Dr. Mitchell agreed that the loss totalled $42,312.18. Pray apportioned this amount among the Insurance Companies, according to the amount of coverage they had underwritten. He also prepared proof of loss forms which Dr. Mitchell signed on September 25, 1969.

Dr. Mitchell understood his agreement with Pray to be a final agreement with the Insurance Companies of the amount he would receive. Some of the Insurance Companies issued checks based on the forms prepared by Pray. Before Dr. Mitchell received the checks, however, Mr. J. S. McClure, another adjustor from the General Adjustment Bureau, reviewed Dr. Mitchell's loss. McClure concluded that the $42,312.18 figure was too high. As a result, the Insurance Companies reduced the amount they were willing to pay to $20,900 and recalled the checks previously issued. Before November 12, 1969, they informed Dr. Mitchell that they would not approve the amount Pray had recommended.

On November 12, 1969, Dr. Mitchell wrote each Insurance Company. He complained about the second adjustor having been sent, and asserted that "Mr. McClure's only function is to whittle my loss and to chisel". Dr. Mitchell demanded "arbitration".

The Insurance Companies interpreted Dr. Mitchell's demand for "arbitration" as a request that his loss be appraised under the standard appraisal clause contained in all five policies. ¹ This clause provides that upon written demand by either the insured or the company, each party will appoint a disinterested appraiser. The two appointed appraisers select an umpire to resolve disagreements among them. Each party pays its own appraiser and one half the cost of the umpire. Dr. Mitchell testified that his demand for arbitration was not a request for an appraisal, but an attempt to enforce the Pray agreement. Nevertheless, Dr. Mitchell appointed an appraiser and incurred his share of the appraisal expenses. He never objected to the Insurance Companies' interpretation of his demand for "arbitration" as an initiation of appraisal proceedings under the policy. Although Dr. Mitchell did not have a lawyer when he originally wrote the Insurance Companies, he retained counsel shortly thereafter. Dr. Mitchell's lawyer helped locate an acceptable appraiser for Dr. Mitchell. The lawyer communicated with the Insurance Companies and never stated that Dr. Mitchell objected to the appraisal. Dr. Mitchell never renewed his request for "arbitration". He never asked to stop the appraisal proceeding as a mistake.

On October 20, 1971, the appraisers set Dr. Mitchell's loss at $20,957.41. At various times before the appraisal, Dr. Mitchell had repaired hurricane damage at his own expense. He had also added improvements to the buildings that did not exist before Camille. The appraisers did not determine the loss to each building or to the component parts of the buildings, although the appraisal provision in the policies called for the loss to be itemized.

The Insurance Companies tendered $20,957.41 to Dr. Mitchell. Dr. Mitchell's attorney returned the checks to the Insurance Companies on November 30, 1971. The accompanying letter explained:

. . . Dr. Mitchell hereby rejects such appraisal as being so inadequate as to be in effect a fraud and on the ground that the appraiser certainly made a mistake in arriving at the actual cash value before the loss and the loss. It is further rejected on the ground that said appraiser (sic) does not comply with the terms of the policies in force at the time of the loss.

Dr. Mitchell did not object on the ground that that appraisal committee was wrongfully empaneled.

Dr. Mitchell finally brought suit against the Insurance Companies in August 1975 shortly before the statute of limitations expired. In the first count of his complaint he asserted that his property had been a total loss, and he asked for the full $55,000 value of the policies, with costs and interest from the date of the loss. In the second count he alleged that he had entered into an agreement with Pray, representative of the Insurance Companies. He asked that this agreement be enforced and that he receive a judgment of $42,312.18. The Insurance Companies conceded liability of $20,957.41 and deposited that amount in the registry of the court. They denied that the agreement with Pray had any validity and relied upon the appraisal.

The case was tried before a jury. Only Dr. Mitchell testified. In the course of his testimony he said that he had rejected the appraisal because it was too low. After the plaintiff rested, and again at the end of the entire case, the Insurance Companies unsuccessfully moved for a directed verdict in their favor. ² After being instructed, the jury returned a verdict of $42,312.18 with interest from September 25, 1969. The district judge denied the defendants' motion for a judgment notwithstanding the verdict or for a new trial. The district judge, however, granted the Companies' motion for an amended judgment. He vacated the jury's interest award and allowed interest only from May 6, 1976, the date of the jury verdict and entry of judgment.

For the jury to have reached a verdict in the amount of $42,312.18, it was necessary for the jury to accept Dr. Mitchell's argument that he had a binding contract with the Insurance Companies, entered into with their agent Pray, to pay $42,312.18 for his hurricane losses. The Insurance Companies have two major arguments against this theory. First, they contend that there never was an agreement because Pray had no authority, real or apparent, to settle Dr. Mitchell's claim. According to the Insurance Companies, there is no proof in the record that Pray had actual authority to make a final settlement of a claim. They concede that Dr. Mitchell could also prevail by showing Pray had apparent authority. They point out, however, that under Mississippi law there are three essential elements to claims based on apparent authority: (1) acts of the principal; (2) reliance on these acts by a third person; and (3) a change of position by the third person to his detriment. Steen v. Andrews, 1955, 223 Miss. 694, 78 So.2d 881, 883. The Insurance Companies do not dispute the first two elements, but contend that Dr. Mitchell did not change his position to his detriment before the Insurance Companies repudiated any apparent authority that Pray might have had.

Second, the Insurance Companies argue that even if the Pray agreement was valid at one time, when Dr. Mitchell requested "arbitration" and participated in the appraisal proceedings he "waived and abandoned" any agreement with Pray.

The district court did not instruct the jury on the Insurance Companies' answers to Dr. Mitchell's attempt to enforce the supposed agreement with Pray. Dr. Mitchell defends this shortcoming on the ground that the Insurance Companies never raised their contentions before the trial judge. The record shows that the issues were adequately raised below. It is true that the Companies did not propose any instructions specifically outlining the elements of apparent authority or of waiver and abandonment. The Companies did object, however, to several instructions proposed by the plaintiff and given by the district court. Among other things, the Insurance Companies contended that the instructions given foreclosed jury...