Nautilus Ins. Co. v. First Nat. Ins., Inc., 92-085

Decision Date03 September 1992
Docket NumberNo. 92-085,92-085
Citation49 St.Rep. 802,254 Mont. 296,837 P.2d 409
PartiesNAUTILUS INSURANCE COMPANY, Plaintiff and Appellant, v. FIRST NATIONAL INSURANCE, INC., d/b/a the FNI Group, Defendant and Respondent.
CourtMontana Supreme Court

Barry G. O'Connell and Cindy E. Younkin, Moore, O'Connell, Refling & Manos, Bozeman, for plaintiff and appellant.

Robert M. Carlson, Corette, Pohlman, Allen, Black & Carlson, Butte, for defendant and respondent.

GRAY, Justice.

Nautilus Insurance Company appeals from the granting of a directed verdict, and the judgment entered thereon, in favor of First National Insurance, Inc., by the Fifth Judicial District Court, Jefferson County. We affirm.

The dispositive issue on appeal is whether the District Court erred in directing a verdict for the defendant on the basis that no duty was owed to the plaintiff.

Patty Crane (Patty), now known as Patty Flynn, contacted Rick March (Rick) at First National Insurance, Inc. ( FNI ) in January, 1987, seeking fire and liability coverage for business property owned by herself and Walter Crane in Helena, Montana. Rick requested coverage through Sentinel General Agency (Sentinel) for both property and liability insurance and received a quote which he believed included the requested liability coverage. Sentinel sent Rick binders identifying coverage through Nautilus Insurance Company (Nautilus) and Aegon Insurance Company in the aggregate amount of $100,000 ($50,000 coverage by each insurer) for insuring the premises only; the effective date of the policies was February 27, 1987.

The Cranes advised Rick that they also needed liability coverage and he continued to seek coverage from other companies while the Nautilus policy was in effect. As a result of their own efforts, the Cranes obtained the coverage they desired from Travelers Insurance Company effective April 2, 1987. On that date, Patty told Rick about the new coverage and verbally requested FNI to cancel the Nautilus and Aegon policies. Thereafter, via telephone and several letters, Rick advised the Cranes that in order to cancel the policies they must either return the policies or sign a cancellation request/policy release form. The Cranes did neither; nor did Rick inform Nautilus during this time that the Cranes desired to cancel or that they had obtained alternative coverage.

FNI paid the Nautilus premium on the Cranes' behalf on May 13 under its contract with Sentinel requiring payment of all premiums within 45 days of receiving an invoice; under the contract, the payment was due on or before May 15. Under the Nautilus policy, the "unearned premium" which could be recouped upon cancellation was prorated by quarters of the coverage year. In other words, once the coverage was effective on February 27, the maximum unearned premium which could be recovered on cancellation was 75%; the premium for the first three months' coverage--from February 27 to May 27--could not be recouped even if the policy were canceled prior to May 27. The Cranes' building and its contents were totally destroyed by fire on May 23, 1987.

The Nautilus policy was in effect on the date of the fire and the Cranes made a claim for their loss under the policy. Nautilus ultimately paid the $50,000 policy limit.

Nautilus filed suit against FNI in the First Judicial District Court, Lewis and Clark County. The complaint alleged that FNI's negligent failure to procure cancellation of the Cranes' Nautilus policy resulted in damage to Nautilus in the amount of $50,000 plus interest. Upon motion by FNI, venue was changed to the Fifth Judicial District Court, Jefferson County. A jury trial was held on January 15 and 16, 1992. After Nautilus completed its case-in-chief, FNI moved for a directed verdict on the basis that it owed no duty to Nautilus to procure cancellation. The motion was granted, judgment was entered and Nautilus appeals.

Did the District Court err in directing a verdict for the

defendant on the basis that no duty was owed to

the plaintiff?

A directed verdict may be granted only when it appears as a matter of law that the nonmoving party could not recover upon any view of the evidence, including the legitimate inferences to be drawn from it. Hash v. State (1991), 247 Mont. 497, 500, 807 P.2d 1363, 1365; Wilkerson v. Sch. Dist. No. 15, Glacier Cty. (1985), 216 Mont. 203, 211, 700 P.2d 617, 622. On appeal, this Court must view a motion for a directed verdict in a light most favorable to the nonmoving party. Stout v. Montana Power Co. (1988), 234 Mont. 303, 305, 762 P.2d 875, 876.

Here, the District Court directed a verdict for FNI. While it did not state the basis for its decision in so many words, it is clear that the court determined that Nautilus could not prevail on its negligence claims against FNI because, under the undisputed facts of this case, FNI had no legal duty to Nautilus to procure cancellation of the policy. We agree.

Negligence forms the basis for Nautilus' complaint against FNI. There is no dispute that, absent a legal duty running from FNI to Nautilus, Nautilus cannot prevail. Actionable negligence arises only from the breach of a legal duty. Thornock v. State (1987), 229 Mont. 67, 72, 745 P.2d 324, 327; Krone v. McCann (1982), 196 Mont. 260, 265, 638 P.2d 397, 400. Whether a legal duty is owed from one party to another is a question of law for the court. Roy v. Neibauer (1981), 191 Mont. 224, 226, 623 P.2d 555, 556. Thus, the question before us, as it was before the District Court, is whether a legal duty to procure cancellation of the policy was owed to Nautilus by FNI.

The parties agree, and the record supports the fact, that no contract or agency agreement existed between Nautilus and FNI. Margaret Crook, senior property examiner for Nautilus, testified that Sentinel was Nautilus' agent under a written agency contract and that FNI and Rick March were agents of the Cranes. She testified that FNI and Rick could neither bind Nautilus nor cancel the policy without the Cranes' cooperation.

Nautilus argues, however, that an implied agency relationship exists between an independent insurance broker and a carrier with whom...

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