National Old Line Ins. Co. v. Lane

• Decision Date: 06 November 1984
• Docket Number: No. 68901,68901
• Citation: 323 S.E.2d 707,172 Ga.App. 519
• Parties: NATIONAL OLD LINE INSURANCE COMPANY v. LANE.
• Court: Georgia Court of Appeals

Page 707

323 S.E.2d 707

172 Ga.App. 519

NATIONAL OLD LINE INSURANCE COMPANY v. LANE.

No. 68901.

Court of Appeals of Georgia.

Nov. 6, 1984.

J. Thomas Whelchel, Brunswick, John E. Bumgartner, Atlanta, for appellant.

Orion L. Douglass, Brunswick, for appellee.

BANKE, Presiding Judge.

Shellie Lane filed this action against National Old Line Insurance Company to recover actual and punitive damages and attorney fees based on the alleged fraud of one of the company's sales agents, David R. Haman, in inducing her to part with $21,500 for the purchase of several annuity contracts. The plaintiff alleged that Haman had misrepresented to her that she would be entitled to the return of all premiums, plus 7 percent interest, after the contracts had been in force for at least a year, whereas in actuality the cash value of the policies at the end of a year was considerably less than the amount of the premiums paid. This appeal by National Old Line follows the entry of a jury verdict awarding the plaintiff actual damages in the amount of $17,491, a figure representing the full amount of the payments shown to have been made by her to National Old Line, less the amount of two policy loans. The trial court directed a verdict against the plaintiff with respect to the prayer for attorney fees, based on her failure to introduce any evidence establishing the amount thereof, and the jury declined to award any punitive damages.

The following facts are undisputed. Haman became closely involved with the plaintiff's family following the death of her father in 1974. This involvement initially arose from Haman's association with an insurance company which had written insurance on the father's life, but it later expanded to offering help and advice in other "family situations," to use Haman's own words. In 1976, the plaintiff became entitled to receive almost $100,000 in life insurance benefits as the result of the accidental death of her husband. Haman admitted that upon learning of this, he set about attempting to solicit insurance business from her. When the plaintiff remarried that same year, Haman asked her new husband, Bill Hutchinson, to come to work with him as an insurance agent. In September of 1976, Haman borrowed $2,000 from the plaintiff in order to expand his insurance agency to "make room" for Hutchinson. Because the amount of this loan was included in the $21,500 which the plaintiff sought to recover from National Old Line in the present lawsuit, the trial court directed a verdict in the insurance company's favor as to this portion of her claim.

Disregarding the $2,000 loan to Haman, the plaintiff established that, through Haman, she had made three payments to National Old Line totaling $19,500--a $1,500 payment on July 13, 1976; a $3,000 payment on December 31, 1976; and a $15,000 payment on April 10, 1977. In return for these payments, National Old Line issued two annuity policies to her, the first on March 24, 1977, specifying a first year's premium of $1,500, and the second on April 1, 1977, specifying a first year's premium of $7,000. A third policy, specifying a first year's premium of $5,000, was issued in the name of the plaintiff's brother, George W. Carroll, Jr., on April 4, 1977. The plaintiff testified that she had expected her $15,000 payment to the company to result in the issuance of a $10,000 policy to her in addition to the $5,000 policy to her brother and that she consequently tried to get in touch with Haman after receiving the policies. Upon doing so, she learned that he had left town, and she did not hear from him or see him again until the trial of this case. Asked whether she had read the $1,500 policy issued to her on March 24, 1977, the appellant replied that she could not understand it and that she had relied upon Haman to explain it to her.

National Old Line presented evidence that it had made a $1,000 policy loan to the plaintiff on December 20, 1977, as well as a $1,009 policy loan to her brother on November 11, 1977. The jury's award of compensatory damages in the amount of $17,491 was evidently arrived at by deducting the amount of these two policy loans from the total of $19,500 which the plaintiff had paid to the company. In an apparent attempt to erase any remaining obligation which the company might otherwise have to the plaintiff on the annuity policies, the jury also specified in the verdict that its award "relieves the insurance company of all liability." However, this condition was not made a part of the trial court's judgment.

The defendant's primary contentions in this appeal are that the plaintiff failed to exercise due diligence to protect herself from injury; that Haman's conduct cannot be imputed to the company since he was an independent contractor rather than an employee; that the plaintiff is without standing to assert any claim with respect to the $5,000 policy issued to her brother; and that because her own policies had at least some value, she was required to tender them back to the company as a condition precedent to seeking recovery of the entire amount of the premiums paid for them. Held:

1. The jury was authorized to conclude from the evidence that the plaintiff's reliance on Haman's alleged misrepresentations was reasonable, notwithstanding her failure to read the policies or the policy applications. "Where a confidential relationship is found to exist between employer and employee or principal and agent, the duty to read does not bar recovery against the employer or agent." Dawes Mining Co. v. Callahan, 246 Ga. 531, 535, 272 S.E.2d 267 (1980). See generally OCGA § 23-2-58. The existence of such a confidential relationship may be inferred from the evidence in this case.

2. The plaintiff was not required to establish the existence of a master-servant relationship between Haman and National Old Line in order to hold the company contractually liable for his conduct. Accord Home Materials, Inc. v. Auto Owners Ins. Co., 250 Ga. 599, 602-603, 300 S.E.2d 139 (1983). "The principal accepted the contract procured by the agent and when it affirmed the contract it became responsible for the agent's acts. We know of no principle of law that would permit a principal to accept the benefits of a contract procured by fraud and at the same time be relieved of the agent's fraudulent conduct in procuring it." W.T. Rawleigh Co. v. Kelly, 78 Ga.App. 10, 14, 50 S.E.2d 113 (1948). See generally OCGA § 10-6-56. See also United Ins. Co. of America v. Hodges, 161 Ga.App. 146, 148, 291 S.E.2d 50 (1982).

3. We must agree with the defendant's contention that the plaintiff established no right of recovery with regard to the annuity policy issued to her brother. The plaintiff testified that she considered her payment of the $5,000 initial premium for the purchase of this policy to be nothing more or less than a $5,000 loan to her brother, which she expected her brother eventually to pay back to her. The application for the policy was signed by the brother alone, and, as intended, the policy was issued in his name alone. Under these circumstances, the plaintiff was...