National Grange Mut. Ins. Co. v. Wyoming County Ins. Agency, Inc., 13187
| Decision Date | 20 March 1973 |
| Docket Number | No. 13187,13187 |
| Citation | 195 S.E.2d 151,156 W.Va. 521 |
| Parties | NATIONAL GRANGE MUTUAL INSURANCE COMPANY v. WYOMING COUNTY INSURANCE AGENCY, INC. |
| Court | West Virginia Supreme Court |
Syllabus by the Court
1. A breach of duty by an agent, being the equivalent of simple negligence, is sufficient to impose upon the agent liability for his negligent act which proximately causes a loss to his principal.
2. The receipt of a settlement statement by an agent of an insurance company, which reflected that a policy had been cancelled, was sufficient to place the agent on notice of the cancellation.
3. Point 1 Syllabus, Commonwealth Tire Company v. Tri-State Tire Company, W.Va. (193 S.E.2d 544)
Bailey, Worrell & Viers, Robert Bailey, Pineville, for appellant.
Sanders & Blue, Fred O. Blue, Bluefield, for appellee.
This case is before the Court upon an appeal from the final judgment of the Circuit Court of Wytoming County, which judgment was entered in favor of the defendant by the trial court, sitting in lieu of a jury, in a civil action instituted by National Grange Mutual Insurance Company, Inc., as the plaintiff, against Wyoming County Insurance Agency, Inc., as the defendant, to recover damages incurred by the plaintiff from a fire loss for which the plaintiff allegedly paid because the defendant accepted an installment payment on an insurance policy which the plaintiff maintains had been cancelled.
The principal questions presented for decision are whether, under the facts and circumstances of this case, a valid contract of insurance between the plaintiff and its insured was in effect and whether the negligence, if any, of the defendant was the proximate cause of the plaintiff's loss.
In April, 1967, the defendant, as the agent of the plaintiff for the purpose of writing fire insurance policies in Wyoming County, issued a policy in the name of the plaintiff to Lizzie Short, covering her home and its contents. The policy was issued for a three-year period and required the payment of annual premiums in the amount of $79.00. Lizzie Short remitted the first premium to the defendant at the time the policy was issued. An employee of the plaintiff company requested that a particular inspection report and a photograph of the building to be insured be forwarded to the plaintiff. He stated that the memorandum requesting the information was returned to him with a written description of the property noted thereon and an accompanying photograph. He then mailed a second memorandum to the defendant, acknowledging the receipt of the photograph and again requesting that the particular inspection form be forwarded to the company. The defendant denies receiving the second memorandum.
The company received no further information from the defendant. Therefore, from the defendant. Thereore, in June, 1967, a notice of declination was sent to the defendant. The declination notice was defined as a company form letter indicating to the agent that, if compliance with the requested information was not met within the specified time period, the policy would be cancelled. The defendant likewise denies receiving this notice.
On July 7, 1967, the plaintiff mailed a notice to Lizzie Short, the insured, stating that on July 19, 1967, the policy would be cancelled. A certificate of mailing was obtained from the post office at the time the notice was mailed to the insured. The insured and assistant manager of the defendant agency testified that they did not receive any notice of cancellation. The testimony of plaintiff's employee indicates that he directed that a copy of the notice of cancellation be mailed to the defendant.
A settlement of accounts was made between the plaintiff company and the defendant agency each month. On October 3, 1967, the defendant agency received a settlement statement from the plaintiff in the usual form explaining the status of its accounts. The statement reflected that a credit had been issued in favor of Lizzie Short. This statement, by reference to a legend appearing on the reverse side, indicated that Mrs. Short's policy was cancelled.
The assistant manager of the agency testified that when she received the statement she could find nothing in her office files to indicate the policy had been cancelled; nor could she glean from her files any explanation for the credit having been issued. According to her testimony, Mrs. Phillips marked on the statement, 'I can't locate why the credit'. The record reveals that she took no further action relating to the policy.
In April, 1968, the defendant accepted the second installment payment from the insured. The premium was posted to the defendant's accounts receivable and was not remitted to the company.
Under the customary business practices between the plaintiff and the defendant, the defendant was not permitted to remit policy premiums to the plaintiff until they received a settlement statement from the company. The evidence reflects that, while it was the usual custom for the plaintiff to bill the defendant within sixty days, the defendant had issued policies which had been in effect for several years but for which the plaintiff had not billed the defendant.
On November 16, 1968, there was a fire in the Short home. Lizzie Short notified the defendant of her loss, and she was subsequently notified that the plaintiff was resisting payment of the claim. Thereafter, Lizzie Short obtained the assistance of counsel. In January, 1969, the insured received payment in the amount of $8,080.46 from the plaintiff. The plaintiff also paid an independent insurance adjuster $316.64 to process the claim.
The relationship between an agent and his insurance company is controlled by the law of agency. The agent must obey all reasonable instructions and must exercise reasonable care in carrying out its orders. Virginia Surety Company v. Lee, 55 Tenn.App. 501, 402 S.E.2d 714, 718; Annot., 35 A.L.R.3d 907, 912; 3 Am.Jur.2d, Agency, Section 206, page 585. A violation of this duty by the agent involves the legal principle of simple negligence. 3 C.J.S. Agency § 162, page 46; Annot., 35 A.L.R.3d 792, 797. The undisputed receipt and inspection of the settlement statement by the assistant manager of the defendant agency in a normal course of business put the defendant agency on notice that the plaintiff insurance company had canceled the policy. By subsequently accepting a premium, the agency violated a duty placed on it by the notice and was thus negligent.
The court below announced in its opinion a criterion of gross negligence. This is error. A breach of duty by the agent in this respect is equivalent to simple negligence, and simple negligence, standing alone, is sufficient to impose liability on the agent. 43 Am.Jur.2d, Insurance, Section 169, page 226.
Although there are some questions concerning the adequacy of proof of the $316.64 payment to the independent insurance adjustor, the matter of this payment was introduced in evidence and we feel, especially in light of the existing law concerning the damages under fire insurance policies in Maynard v. National Fire Insurance Company of Hartford, 147 W.Va. 539, 129 S.E.2d 443, the plaintiff has adequately shown its damages consisting of $8,080.56 paid the insured, and $316.64 paid to the adjustor for processing the claim.
If the insurance agreement between the plaintiff and Mrs. Short had been in effect at the time of the fire loss due to the failure of the plaintiff's attempt to cancel, the defendant's negligence would not, however, make it liable. The negligence in that event could not be considered the...
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