Nojaim Bros., Inc. v. CNA Ins. Companies

• Decision Date: 15 November 1985
• Docket Number: No. 1,No. 3,No. 2,1,2,3
• Citation: 113 A.D.2d 109,496 N.Y.S.2d 113
• Parties: , 115 A.D.2d 354 NOJAIM BROS., INC., Respondent, v. CNA INSURANCE COMPANIES, Defendant, Fayette Agency, Inc. and Walter A. Harig, Appellants. AppealNOJAIM BROS., INC., Appellant, v. CNA INSURANCE COMPANIES, Respondent, Fayette Agency, Inc. and Walter A. Harig, Appellants. AppealNOJAIM BROS., INC., Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, Respondent. Appeal
• Court: New York Supreme Court — Appellate Division

Page 113

496 N.Y.S.2d 113

113 A.D.2d 109, 115 A.D.2d 354

NOJAIM BROS., INC., Respondent, v. CNA INSURANCE COMPANIES, Defendant,

Fayette Agency, Inc. and Walter A. Harig, Appellants. Appeal No. 1.

NOJAIM BROS., INC., Appellant, v. CNA INSURANCE COMPANIES, Respondent,

Fayette Agency, Inc. and Walter A. Harig, Appellants. Appeal No. 2.

NOJAIM BROS., INC., Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, Respondent. Appeal No. 3.

Supreme Court, Appellate Division Fourth Department.

Nov. 15, 1985.

Saperston, Day, Lustig, Gallick, Kirschner & Gaglione, P.C., Buffalo, N.Y., (Lawrence Schulz, of counsel), for appellants Fayette Agency, Inc. and W. Harig.

John B. Vita, Syracuse, N.Y., for appellant Nojaim Bros., Inc.

Sugarman, Wallace, Manheim & Schoenwald, Syracuse, N.Y., (James Stevens, of counsel), for respondent CNA Ins. Companies.

Carl J. Cochi, Utica, N.Y., for respondent Fireman's Fund Ins. Companies.

Before HANCOCK, Jr., J.P., and CALLAHAN, DOERR, PINE and SCHNEPP, JJ.

SCHNEPP, Justice.

In this action plaintiff seeks a declaration that the defendant CNA Insurance Companies is required to provide defense and indemnification under a Commercial Umbrella Liability Policy in an action for personal injuries resulting from an alleged negligent and illegal sale of intoxicating beverages and in any and all actions alleging liquor law liability arising during the policy period and that defendants Fayette Agency, Inc. and Walter A. Harig are liable for its legal expenses and costs. Plaintiff is engaged in a supermarket business, Fayette Agency, Inc. is in the insurance agency business and is a preferred agent for Continental Casualty Co., a member of the insurance company group of codefendant CNA, and Walter A. Harig is Fayette's chief executive officer. The policy was issued to plaintiff by CNA through Fayette.

The following facts appear from the moving papers in connection with motions and cross motions for summary judgment. Under the insurance company's "Preferred Agency Agreement" with Fayette, the agency had no authority to bind CNA to any "Property and Liability Excess and Surplus" contract without CNA's written authorization. Under this agreement Fayette agreed "not to alter, modify, waive or change any of the provisions or conditions of [CNA] insurance contracts, bonds, rates, rating rules or rating plans", and was granted authority to bind insurance contracts covered by the agreement "only as specifically authorized from time to time by [CNA] in writing", and to countersign such classes of risks written under the agreement. The insurance policy which CNA authorized Fayette to issue to plaintiff effective from December 6, 1981 to December 7, 1982 contained indorsement G32592C that excluded liability coverage for personal injuries resulting from the insured's sale of alcoholic beverages. When advised that the policy exclusion was not acceptable, Harig informed plaintiff that he had the authority to bind CNA, and he "physically removed" the liquor law liability exclusion indorsement from the policy and assured plaintiff that the policy covered liquor law liability. Harig then countersigned the policy as CNA's duly authorized agent, a procedure specifically required under the policy to give it validity. The policy as delivered to plaintiff recited that the indorsement G32592C, which Harig had deleted constituted a part of the policy at time of issue, along with other numbered indorsements. However, Harig failed to notify CNA of the deletion until he reviewed the renewal policy in November 1982 which contained the same exclusion which CNA deleted at his request. A short time later a damage suit was instituted against plaintiff, alleging the sale of intoxicating beverages by plaintiff to a minor on May 16, 1982. CNA denied coverage based on the exclusionary clause contained in the policy it initially authorized Fayette to issue.

Plaintiff appeals Special Term's grant of summary judgment to CNA dismissing its complaint, contending: (1) that Harig had actual or apparent authority to modify the policy issued by CNA, or (2) that CNA is bound by Harig's unauthorized act because plaintiff was unaware of the extent of his authority. Fayette and Harig also appeal Special Term's grant of summary judgment to plaintiff and to CNA on its cross claim, contending that (1) CNA's proof was insufficient to support summary judgment, (2) Fayette and Harig had authority to modify CNA's policies or that there was at least a question of fact concerning their authority, and (3) CNA is estopped from denying the existence of Fayette's and Harig's authority.

The limitations on Fayette's authority under the "Preferred Agency Agreement" are conceded, except that Harig in his supporting affidavit claims that the course of dealing between Fayette and CNA was otherwise and that it was "too impracticable for a general agent to await written permission before modifying a policy". He contends that he pursued an accepted industry practice of modifying the policy and then notifying the insurer and that on several prior occasions modifications were made in insurance contracts issued by CNA and, although CNA was thereafter advised, it made no objection to or comment concerning such modification. Harig avers that it was a mistake to include the indorsement in the policy since it was "unusual" to include such indorsement in an umbrella policy for a grocery store, that Fayette was authorized to modify CNA's contract and that the removal of the indorsement in question was "entirely proper". He states that the only irregularity in the present case was the failure to notify CNA after the liquor liability exclusion indorsement was deleted from plaintiff's policy. However, in his view CNA would not have refused to issue the policy as modified and that the delay in communicating notice to CNA "neither increased the risk or [sic] caused the insurance company any damage".

Special Term, in dismissing all claims against CNA and in holding that Fayette and Harig were liable to plaintiff for not procuring the insurance coverage it requested, found that CNA's assertions that it had not represented to plaintiff in any way that Fayette or Harig had authority to modify the insurance contract were not disputed. Special Term, moreover, held that the agreement between CNA and Fayette does not grant Fayette authority to modify the insurance contract, that the insurance policy as issued by CNA excluded coverage pertinent to the underlying action for damages and that Fayette did not meet its burden of proof to create an issue of fact concerning its authority.

We agree with plaintiff and Fayette and Harig that in some instances an insurer is bound by its agent's act even though that act exceeds the agent's actual or implied authority. This result has been reached where the insurer's general agent acted within its apparent authority (Cees Rest. v. Lobdell, 15 N.Y.2d 275, 281-282, 258 N.Y.S.2d 87, 206 N.E.2d 180; Abbott v. Prudential Ins. Co., 281 N.Y. 375, 379, 24 N.E.2d 87; Corklite Co., Inc. v. Rell Realty Corp., 249 N.Y. 1, 7, 162 N.E. 565; Ruggles v. Am. Cent. Ins. Co. of St. Louis, 114 N.Y. 415, 421-422, 21 N.E. 1000; Kramnicz v. First Nat. Bank of Greene, 32 A.D.2d 1009, 1011-1012, 302 N.Y.S.2d 22). It is noted, however, that "[e]ssential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possessed authority to enter into a transaction. The agent cannot by his own acts imbue himself with apparent authority." (Hallock v. State of New York, 64 N.Y.2d 224, 231, 485 N.Y.S.2d 510, 474 N.E.2d 1178,accord., Greene v. Hellman, 51 N.Y.2d 197, 204, 433 N.Y.S.2d 75, 412 N.E.2d 1301; Ford v. Unity. Hosp., 32 N.Y.2d 464, 473, 346 N.Y.S.2d 238, 299 N.E.2d 659.) Plaintiff has not alleged in its complaint or moving papers that CNA ever made representations to it or acted toward it in a manner that could give rise to the appearance and belief that Fayette was authorized to...